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| statements which describe the world as it is |
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| statements which describe how the world should be |
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| the branch of economics that focuses on actions of particular actors within the economy, like households, workers, and business firms |
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| the branch of economics that focuses on the economy as a whole,including issues like growth, unemployement, inflation, and the balance of trade |
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| Adam Smith Wealth of Nations |
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| the invisible hand. believed by pursuing his own interest he promotes that of society more effectually than he really intends. |
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| whatever must be given up to obtain something that is desired. |
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| 3 basic economic questions |
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1) what is produced?
2) how is it produced?
3) for whom is it produced? |
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| 2 methods of making economic decisions |
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1) the market (market-oriented)
2) the government planning (command economy) |
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| use of money exchanged by buyers and sellers with an open and understood system of value and time trade-offs to produce the best distribution of goods and services |
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| an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market. |
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| advocates collective or government ownership and administration of the means of production and distribution of goods. |
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| the common relationship that a higher price leads to a lower quantity demanded of a certain good or service |
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| the common relationship that a higher prce is associated with a greater quantity supplied |
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| price equilization principle |
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| international prices are similar |
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| factors that shift a demand curve |
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| income, substitutes, taste, price expectations |
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| factors that shift a supply curve |
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| changs in natural conditions, altered prices for inputs to production, new technologies for production, and government policies that affect production costs. |
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| desire for the good and the ability to pay for it |
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| suggests the possibility that broader social good can emerge from selfish individual actions |
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| extra money. the amount an indivudal was willing to pay minus the actual paid amount |
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| the amount that a seller is paid for a good minus the seller's actual cost |
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| A market used to exchange the services of resources labor, capital, and natural resources. |
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| government laws to regulate prices |
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| a law that prevents a price from rising above a certain level |
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| a law that prevents a price from falling below a certain level |
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| the quantity supplied exceeds the quantity demanded at the given price |
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| at the existing price, the quantity demanded exceeds the quantity supplied. |
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| a price floor that makes it illegal for an employer to pay emplyees less than a certain hourly rate |
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| the elasticity calculated from the appropriate formule has an absolute value greater than 1. |
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| the elasticity calculated from the appropriate formula has an absolute value less than 1 |
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| the elasticity calculated has an absolute value that is equal to 1. |
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| the percentage change in quantity demanded divided by the percentage change in income. |
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| total amount of satisfaction |
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| the additional utility provided by one additional unit of consumption |
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| diminishing marginal utility |
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| each marginal unit of a good consumed provides less of an addition to utility than the previous unit |
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| equal amount of satisfaction for each dollar you spend |
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government spending
investment
exports |
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