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Definition
| spending money on one thing leaves less money to be spent on something else |
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Term
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Definition
| benefits that cause a spender to purchase one thing over another |
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Term
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Definition
| trade goods, all parties benefit from voluntary exchange |
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Term
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Definition
| utilized to make intelligent choices |
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Term
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Definition
| how wealth is spread out among society |
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Term
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Definition
| all resources are limited. unlimited wants, limited resources. |
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Term
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Definition
| exchanges take place through markets and are guided by the prices |
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Term
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Definition
| markets in which firms sell their outputs |
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Term
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Definition
| spending money on one thing leaves less money to be spent on something else |
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Term
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Definition
| benefits that cause a spender to purchase one thing over another |
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Term
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Definition
| trade goods, all parties benefit from voluntary exchange |
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Term
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Definition
| utilized to make intelligent choices |
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Term
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Definition
| how wealth is spread out among society |
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Term
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Definition
| all resources are limited. unlimited wants, limited resources. |
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Term
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Definition
| exchanges take place through markets and are guided by the prices |
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Term
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Definition
| markets in which firms sell their outputs |
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Term
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Definition
| market where services of workers are bought and sold |
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Term
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Definition
| markets involved in borrowing and lending funds, banks, insurance, bonds, stock market |
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Term
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Definition
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Term
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Definition
| economic decisions in firms and households |
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Term
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Definition
| studies the behavior of the economy as a whole |
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Term
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Definition
| a set of assumptions, and conclusions drawn from those assumptions |
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Term
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Definition
| a change in one variable is consistent with a change in another variable |
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Term
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Definition
| a change in one variable is not only correlated with, but produces the change in, the other variable |
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Term
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Definition
| describes how something might change and makes predictions, uses facts |
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Term
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Definition
| inferences and evaluations, disputable |
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Term
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Definition
| battle between producers for consumers |
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Term
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Definition
| involves self-interested consumers, profit-maximizing businesses, and perfect competition |
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Term
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Definition
| consumer chooses what maximizes his or her benefits |
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Term
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Definition
| every business is a price taker and cannot influence the market price. it can sell as much as it wants but cannot change the price |
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Term
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Definition
| sets their product at the market price of similar products |
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Term
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Definition
| goods go to people and businesses that are most willing and able to pay for them |
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Term
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Definition
| ownership of property by individuals or corporations |
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Term
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Definition
| rights of private property owners; right to use it as they see fit and sell it |
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Term
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Definition
| a system of allocating scarce resources |
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Term
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Definition
| the group of available choices |
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Term
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Definition
| the constriction of an opportunity set due to money |
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Term
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Definition
| the constriction of an opportunity set due to time |
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Term
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Definition
| the amount of goods a firm can produce given its resources |
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Term
| Production Possibilities Curve |
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Definition
| shows the boundary of the opportunity set given the possibilities |
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Term
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Definition
| as one input increases, the outputs become smaller and smaller |
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Term
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Definition
| the ratio of any two prices |
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Term
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Definition
| the next-best thing you gave up in order to get something |
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Term
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Definition
| when a country can produce a good more efficiently than another country can |
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Term
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Definition
| if one country's relative efficiency in the production of one good is higher than another country's |
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Term
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Definition
| the cost to purchase one more of something |
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Term
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Definition
| the benefits of buying one more of something |
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Term
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Definition
| costs that have been taken and cannot be recovered |
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Term
| Steps of a Rational Choice |
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Definition
1. identify opportunity set
2. define trade-off(s)
3. calculate the costs correctly (ignore sunk costs) |
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Term
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Definition
| what must be given in exchange for the good |
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Term
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Definition
| the quantity of a good or service that a household/firm chooses to buy at a given price |
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Term
| Demand Curve vs. Market Demand Curve |
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Definition
| shows the quantity demanded at each price, gives the total quantity of a good demanded at that price |
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Term
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Definition
| if an increased price for one increases demand for the other (butter and margarine) |
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Term
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Definition
| an increase in the price of one good decreases the demand for another (sugar and coffee) |
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Term
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Definition
| causes the quantity demanded to shift at a given price. caused by a nonprice issue |
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Term
| Change in Quantity Demanded |
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Definition
| movement along the demand curve, caused by a change in price |
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Term
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Definition
| the quantity of something a firm wants to sell at a given price |
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Term
| Supply Curve vs. Market Supply Curve |
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Definition
| the quantity a company is willing to supply at each price, total quantity of a good a company is willing to sell at a price |
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Term
| Change in Quantity Supplied |
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Definition
| price issue, more produced as price increases |
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Term
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Definition
| nonprice issue, change in tech, environmental change, increased input prices, etc |
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Term
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Definition
| a situation where supply and demand points meet, no reason to change. |
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Term
Equilibrium Price vs.
Equilibrium Quantity |
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Definition
| price at which demand=supply, quantity at which demand=supply |
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Term
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Definition
| price where supply = demand, no excess |
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Term
| Excess Supply vs. Excess Demand |
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Definition
| quantity supplied > quantity demanded; quantity demanded > quantity supplied |
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Term
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Definition
| in equilibrium demand = supply, changes in prices reflect shifts in the curve |
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Term
| Price Elasticity of Demand |
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Definition
| percent change in quantity demanded divided by percent change in price |
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Term
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Definition
| more sensitive to price change >1% |
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Term
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Definition
| less sensitive to price change <1% |
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Term
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Definition
price times quantity sold
R=pQ |
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Term
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Definition
| elasticity=1, change in price just offsets change in quantity |
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Term
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Definition
| any change in price results in demand dropping to zero |
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Term
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Definition
| the demand remains the same at any price |
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Term
| Price Elasticity of Supply |
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Definition
| percentage change in quantity supplied divided by percentage change in price |
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Term
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Definition
shortage- too much demand
surplus- too much supply |
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Term
| Price Ceilings vs. Price Floors |
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Definition
Ceilings- set a maximum price that can be charged for a product
Floor- minimum price |
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Term
| Slope (of a budget constraint) |
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Definition
| shows the trade-off of different budget allocations |
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Term
| Income Elasticity of Demand |
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Definition
| percentage change in consumption divided by percentage change in income |
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Term
| Inferior Goods vs. Normal Goods |
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Definition
inferior - income increases, consumption decreases (negative income elasticity)
normal - income increases, consumption increases (positive income elasticity) |
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Term
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Definition
| the reduction in consumption of a good who's price has increased (change in "real income") |
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Term
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Definition
| the reduction in consumption of a good who's price has increased (change in price) |
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Term
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Definition
| the benefits of consumption consumers get from the combination of goods they consume |
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Term
Marginal Utility
Diminishing Marginal Utility |
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Definition
| the extra "enjoyment" someone gets from buying one more of something; as a person gets more and more of something the marginal utility becomes less and less |
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Term
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Definition
| the difference between what was paid and what you would have been willing to pay |
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Term
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Definition
| determining why people make choices using econ and psych |
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Term
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Definition
| simply possessing something can alter a person's preferences |
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Term
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Definition
| individuals are particularly sensitive to loss |
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Term
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Definition
| people make decisions based on a usual reference point |
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Term
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Definition
| increasing relations between the countries |
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Term
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Definition
| produced abroad, bought domestically; produced domestically, bough abroad |
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Term
| Bilateral Trade vs. Multilateral Trade |
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Definition
| trade between two entities, trade among several parties |
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Term
| Five Bases of Comparative Advantage |
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Definition
1.Natural Endowments
2.Acquired Endowments
3.Superior Knowledge
4.Specialization
5.Interactions |
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Term
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Definition
| antitrade, wanting to "protect" the economy from the effects of trade |
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Term
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Definition
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Term
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Definition
| policies directed at affecting either imports or exports |
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Term
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Definition
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Term
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Definition
| limits the amount of foreign goods that can be imported; making a profit from buying at an international price and selling at a higher domestic price due to quotas |
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Term
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Definition
| the sale of products overseas below the home countries prices AND below the price of cost |
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Term
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Definition
| taxes that offset advantages provided by subsidies |
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Term
| Beggar-thy-neighbor Policies |
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Definition
| attempts to increase national employment and output (takes away jobs from other countries) |
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Term
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Definition
| firms will never be able to start up successfully unless they are protected from foreign companies |
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Term
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Definition
| business protection can give a country a strategic advantage over rivals |
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Term
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Definition
| General Agreement on Tariffs and Trade; World Trade Organization (multilateral trade agreements) |
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Term
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Definition
| european union and north american free trade agreement (regional trade agreements) |
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Term
| Trade Creation vs. Trade Diversion |
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Definition
creation- new trade generated due to lower tariffs
diversion- trade diverted away from outside countries as a result of a regional lowering of tariffs |
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