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tas1_ECON 252 Purdue University
Macroeconomics
62
Economics
Undergraduate 2
01/31/2011

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Term
Scarcity
Definition
that although our wants are unlimited, the resources available to fulfill thos wants are limited.
Term
Economics
Definition
is the study of the chices consumer, business manager, and government official make to attain their goals, given their scarce resources
Term
Three important economic ideas
Definition

1) People are rational,

2) People respond to incentived

3) optimal decisions are made at the margin

Term
Three Fundimental Questions
Definition

1)What goods and services will be produced?

2) How will the goods and services be produced?

3)Who will recieive the goods and services produced?

Term
Economic Models
Definition
are simplified version of reality used to analyze real-world economic situations
Term
Market
Definition
is a group of buyers and sellers of a good or service and the instituion or arrangement by which thery come together to trade
Term
Rationality
Definition
Economists generally assume that people are rational.
Term
Incentives
Definition
Economists emphasize that consumers and firms consistently respond to economic incentives
Term
Marginal
Definition
"extra" or "additional"
Term
When is it the optimal dcision to continue any activity.
Definition
Up to the point where Marginal Benefit = Marginal Cost
Term
Marginal Analysis
Definition
comparing marginal benefits and marginal costs
Term
trade-offs
Definition
Producing more of one good or service means producing less of another good or service
Term
Opportunity Costs
Definition
is the highes-valued alternative that must be given up to engage in that activity.
Term
Centrally Planned Economy
Definition
the government decides how economic resources will be allocated
Term
Market Economy
Definition
decisions of households and firms interacting in markets allocate economic resources
Term
Mixed Economy
Definition
 still primaily a market economy because most economic decisions result from interaction of buyers and sellers in markets, howerver, the government plays a significant role in the allocation of resources
Term
Positive Analysis
Definition
concerned with what is
Term
Normative Analysis
Definition
concerned with what ought to be
Term
Production Possibilities Frontier (PPF)
Definition
is a curve showing the maximum attainable combinations of two products that may be produced witha vailable resources and current technology.
Term
[image]What are Points  A,B,and C referred to as?
Definition

A- is attainable, but not efficient

B- is attainable and efficient

C- is unattainable

Term
How is  Economic Growth  shown?
Definition
Shifts in the Production possibiliites frontier (outwards)
Term
Absolute Advantage
Definition
ability of and individual, afirm, or a country to produce more of a good or service than competitors
Term
Comparative Advantage
Definition
the ability of and individual, a firm, or a country to produce a good or service at a loer opportunity cost than competitors
Term
Market
Definition
is a group of buyers and sellers of a good or service and thye institution or arrangement by which they come together to trade
Term
Product Markets
Definition
are markets for goods-such as computers-and services-such as medical treatment
Term
Factors of Production
Definition
are the inputs used to make goods and services.
Term
What are the four broad categories of the factors of production
Definition

1) Labor

2) Capital

3) Natural resources

4) An Entrepeneur

Term
Circular-Flow Diagram
Definition
[image]simple economic model to see how participants in markets are linked
Term
What are the two key groups in a market structure?
Definition

1) Household

2) Firms

Term
Free Market
Definition
when athe government places few restrictions on how a goodor a service can be produced or sold or on how a factor of production can be employed.
Term
Entrepreneur
Definition
is a someone who operates a business.
Term
Perfecly Competitive Market
Definition
many buyers and sellers, all the products sold are identical, and there are no barriers to new firms entering the market
Term
Demand Schedules
Definition
shows the relationship between the price of a product and the quantity of the product demanded at that price
Term
Quantity Demanded
Definition
amount of a good or a service that a consumer is willing and able topurchase at a given price
Term
Demand Curve
Definition
curve that shows the relationship between the price of a product and the uantiy of the product demanded.
Term
Market Demand
Definition
demand by all the consumers of a given good or service
Term
Law of Demand
Definition
Holding everything else constant, when the price of a product falls, the quantity demanded of  the product will increase, and when the prce of a product rises, the uantity demanded of the product will decrease
Term
Substitution Effect
Definition
refer to the change in the quantity demanded of agood that results from a change in price, making the good more or less expensive relative to other goods that are substitutes
Term
Income Effect
Definition
price change refers to the change in the quantty demanded of a good that results from the effect of a change in the good's price on consumers' purchasing power
Term
certeris paribus condition
Definition
Latin for  "all else equal"
Term
Variable that shift the demand curve
Definition

-Income

-Prices of related goods

-Tastes

-Population and demographics

-Expected future prices

Term
Normal Goods vs Inferior Goods
Definition
Normal goods will show an increase in demand as income increase and a decrease in demand as income decreases.  And inferrior good as hand inverse relation to the relation of income.   An inferior good will be purchased in substitute for a normal good when the income in decreased and vise versa.
Term
Substitutes vs  Complements
Definition
If two goods are substitutes then the change in demand of one will cause a shift in the demand curve of the other in a way that is opposite of the the change.   If two goods are complements then the change in demand of one will cause a shift in another in a way that is the same as the change of the original good.
Term
Allocative Efficency
Definition
 occurs when there is an optimal distribution of goods and services
Term
Quantity Supplied
Definition
the amount of a good or service that a firm is willing and able to supply at a given price
Term
Supply Schedule
Definition
is a table that shows the relationship between theprice of a product and the quantity of the product supplied
Term
Supply Curve
Definition
shows the relationship between the price of a production and the quantity of the product supplied.
Term
Law of Supply
Definition
which states that, holding everything else constant, increases in price caus increases in the quantity supplied, and decreases in pice cause decreades in the quantity supplied
Term
Variables that shift the market supply
Definition

- Prices of inputs

- Technological change

- Prices of substitutes in production

- Number of firms in the market

- Expected future prices

Term
Market Equilibrium
Definition

At market equilibruimwillthe quantitydemanded equal the quantity supplied

[image]

Term
Competitve Market Equilibrium
Definition
Markets that have many buyers and many sellers are competitive markets, and equilibruim in thers markets.
Term
Productive Efficiency
Definition
occurs when the economy is operating at its production possibility frontier (PPF).
Term
Neutral Analysis
Definition
measures the costs and benefits of different courses of action
Term
One of the basic facts of life is that people must make choices as they try to attain their goals.  This unavoiidable fact comes from a reality an economist calls....
Definition
Scarcity
Term
Productive Efficiency
Definition
occurs when a good or service is produced at the lowest possible cost
Term
Allocative Efficiency
Definition
occurs when production is in accordance with consumer preferences
Term
Equity
Definition
the fair distribution of economic benfits
Term
Black Market
Definition
market in which buying and selling take place at prices that violate government price regulations
Term
Tax Incidence
Definition
the actual division of the burden of tax between buyers and sellers in a market
Term

Which Areas Represtent Consumer and Producer Surplus

[image]

Definition

Area A is the Consumer Surplus

Area B is the Producer Surplus

Term

Which Areas Represtent Consumer and Producer Surplus and Dead Weight Loss

 [image]

Definition

A is the Consumer Surplus

B+C+D is the Producer Surplus

E+F is the Dead Weight Loss

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