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| the part of economics dealing with value judgements (i.e. it deals with "what ought to be"). |
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| the part of economics that deals with questions that can be resolved by an appeal to the facts (i.e. it deals with "what is"). |
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| the ability to produce a good or service with fewer resources than another person, country or region. |
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| the ability to produce a good or service at a lower opportunity cost than another person, country, or region. |
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| all combinations of price and quantity at which consumers are willing and able to purchase a good or service when everything except the price of the good or service is held constant. |
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| all combinations of price and quantity at which firms are willing and able to sell a good or service when everything except the price of the good or service is held constant |
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| the inverse relationship between price and quantity demanded. As the price of a good falls (will everything assumed to be held constant), the quantity demanded increases. |
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| the direct relationship between price and quantity supplied. As the price of a good rises (will everything assumed to be held constant), the quantity supplied increases. |
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| a good for which a demand increases when income increases |
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| a good for which demand decreases when income increases |
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| a good with an income elasticity of demand greater than 1. |
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| a pair of goods for which an increase in the price of one of the goods results in the increase in the demand for the other good |
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| a pair of goods for which an increase in the price of one of the goods results in a decrease in the demand for another good. |
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| the amount by which quantity supplied exceeds quantity demanded. |
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| the amount by which quantity demanded exceeds quantity supplied |
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| the excess of what consumers would pay, rather than go without the good, over what they actually pay for the good. The consumer surplus is the area under the demand curve above the price. |
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| the excess of what firms receive for a good over the minimum amount they must receive to be induced to supply the good. The producer surplus is the area above the supply curve below the price. |
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| costs or benefits of production or consumption that spill over to parties not directly involved in the transaction between buyers and sellers. |
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| Suppose there is a resource that has an externality associated with its use. if the property rights to the resource are assigned, rather than unassigned, and if the transactions (or bargaining) costs are low, the ultimate use of the resource is independent of the assignment of the property rights. |
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| Price Elasticity of Demand |
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Definition
| the percentage of change in quantity demanded associated with a one percent increase in price |
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| Income Elasticity of Demand |
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Definition
| the percentage change in quantity demanded associated with a one percent increase in income |
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| Cross-Price Elasticity of Demand |
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| the percentage change in quantity demanded of one good associated with a one percent increase in the price of another good |
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| the highest valued alternative forsaken (re-routing one's time or resources toward one good or service over another) |
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| Price ($/unit) x Quantity (amount of units) |
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Factors, other than the price of the good, which influence the amount of the good the the consumer is willing and able to purchase. 1) Tastes and Preferences 2) Income 3) Price Availability of Related Goods 4) Number of Consumers 5) Expectations |
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Definition
factors, other than the price of the good, which influence the amount of the good that the firm is willing and able to sell. 1) Price and Availability of resources 2) Technology 3) Prices of other goodds that could be produced with the firm's resources 4) Expectations 5) Taxes |
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Definition
| a good in which the price and demand are inversely related, so that when price goes down, demand goes up, good is usually seen to be a non-necessity (ie potato chips, beany babies, chocolate) |
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| a good in which price is independent of demand, or when changes in the quantity demanded does not effect the price of the good, these goods are often seen to be necessary, or those with no substitutes (ie vaccines, gasoline, medical needs) |
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