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71 Cards in this Set
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economics
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the social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity
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economic perspective
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economic way of thinking
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opportunity cost
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to obtain more of one thing, society forgoes the opportunity of getting the next best thing
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utility
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the pleasure, happiness, or satisfaction obtained from a service/good
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marginal analysis
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the comparisons of marginal benefits and marginal costs, usually decision making
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economic principle
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a statement about economic behavior or the economy that enables prediction of probable effect of certain actions
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scientific method
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the procedure for the systematic pursuit of knowledge including observation of facts and the formulation and testing of hypothesis to obtain theories, principles, and laws
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other-thing-equal assumption
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the assumption that factors other than those being considered are held constant; ceteris paribus
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macroeconomics
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the part of economics concerned with the economy as a whole; with such major aggregates as the household, business and government sectors, and with measure of total economy
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aggregate
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a collection of economic units treated as if they were one. all individual goods and services combined into a prize level or all units of output are aggregated into GDP
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microeconomics
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concerned with decision making by individual units such as households, firms, or industries and with specific markets, specific goods, and specific prices
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positive economics
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the analysis of factor data to establish scientific generalizations about economic behavior
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normative economics
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economics involving value judgment about what the economy should be like; focuses on goals and policies
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economizing problem
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the need to make choices because economic wants exceed economic needs
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budget line
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a schedule or curve that shows various combinations of two products a consumer can purchase with specific money income
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economic resources
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all natural, human, and manufactured resources that go into the production of goods and services
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land
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all natural resources used in the production process, such as arable land, forests, mineral and oil deposits, and water resources
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labor
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physical and mental talents of individuals used in producing goods and services
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capital
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all manufactured aids used in producing consumer goods and services
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investment
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the purchase of capital goods
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entrepreneurial ability
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specific special human resource known for being innovative, making strategic business decisions, and taking risks
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factors of production
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inputs to produce goods and services
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consumer goods
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products that satisfy our wants directly
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capital goods
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products that satisfy our wants indirectly by making possible more efficient production of consumer goods
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production possibilities curve
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the data represented in a production possibilities table
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law of increasing opportunity cost
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as the production of a particular good increases, the opportunity cost of producing additional units of another rises
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economic growth
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a larger total output
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economic system
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a particular set of institutional arrangements and a coordinating mechanism for solving the economizing problem; a method for organizing an economy, of which market system and command system are the two general types
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command system
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a method of organizing an economy in which property resources are publicly owned and government uses central economic planning to direct and coordinate economic activities; command economy; communism
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market system
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all the product and resource markets of a market economy and the relationships among them; a method that allows the prices determined in those markets to allocate the economy's scarce resources and to communicate and coordinate the decisions made by consumers, firms, and resource suppliers
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private property
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the right of private persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other property.
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freedom of enterprise
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the freedom of firms to obtain economic resources, to use those resources to produce products of the firm's own choosing, and to sell their products in markets of their choice
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freedom of choice
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the freedom of owners of property resources to employ or dispose of them as they see fit, of workers to enter any line of work for which they are qualified, and of consumers to spend their incomes in any manner they think is appropriate
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self-interest
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that which each firm, property owner, worker, and consumer believes is best for itself and seeks to obtain
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competition
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the presence in a market of independent buyers and sellers competing with one another along with the freedom of buyers and sellers to enter and leave the market
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market
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any institution or mechanism that brings together buyers and sellers of a particular good or service
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specialization
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the use of the resources of an individual, a firm, a region, or a nation to concentrate production on one or a small number of goods and services
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division of labor
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the separation of the work assigned to produce a product into a number of different tasks that are performed by different workers; specialization of labor
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medium of exchange
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any item sellers generally accept and buyers generally use to pay for a good or service; money; a convenient means of exchanging of goods and service without engaging in barter
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barter
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the exchange of goods and services for another good or service
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money
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any item that is generally acceptable to sellers in exchange for goods and services
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consumer sovereignty
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determination by consumers of the types and quantities of goods and services that will be produced with the scarce resources of the economy; consumer's direction of production through their dollar votes
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dollar votes
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the "votes" that consumers and entrepreneurs cast for the production of consumer and capital goods, respectively, when they purchase these goods in product and resource markets
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creative destruction
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the hypothesis that the creation of new products and production methods simultaneously destroys the market power of existing monopolies
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invisible hand
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the tendency of firms and resource suppliers that seek to further their own self-interests in competitive markets to also promote the interest of the society
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circular flow diagram
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an illustration showing the flow of resources from households to firms and of products from firms to households. these flows are accompanied by reverse flows of money from firms to households and vice versa.
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resource market
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a market in which households sell and firms buy resource or the services of resources
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product market
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a market in which products are sold by firms and bought by households
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demand
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the amounts of a good or service consumers want
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demand schedule
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a schedule showing the amounts of a good or service that buyer(s) wish to purchase at various prices during some time period
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law of demand
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the principle that, other things equal, an increase in a product's price will reduce the quantity demanded and vice versa
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diminishing marginal utility
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in any specific time period, each buyer of a product will derive less utility from each successive unit of the product consumed
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income effect
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a change in the quantity demanded of a product that results from the change in real income caused by a change in the product's price
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substitution effect
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1. a change in the quantity demanded of a consumer good that results from a change in its relative expensiveness caused by a change in the product's price
2. the effect of a change in the price of a resource on the quantity of the resource employed by a firm, assuming no change in its output |
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demand curve
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a curve illustrating demand
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determinants of demand
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factors other than price that determine the quantities demanded of a good/service
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normal goods
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a good/service whose consumption increases when income o\increases and falls when income decreases, price remaining constant
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inferior goods
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a good/service whose consumption declines as income rises (and conversely), price remaining constant
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substitute good
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products or services that can be used in place of each other. when the price of one falls, the demand for the other product falls and vice versa
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complementary good
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product and services that are used together. when the price of one falls, the demand for the other increases
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change in demand
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a change in the quantity demanded of a good or service at every price; a shift of the demand curve to the left or right
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change in quantity demanded
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a change in the amount of a product that consumers are willing and able to purchase because of a change in the product's price
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supply
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the amount of a good or service that seller(s) offer
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supply schedule
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a schedule showing the amounts of a good or service a seller(s) will offer at various prices during some period
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law of supply
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the principle that, other things equal, an increase in the price of a product will increase the quantity of it supplied, and vice versa
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supply curve
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a curve illustrating supply
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determinants of supply
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factors other than price that determine the quantities supplied of a good or service
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change in supply
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a change in the quantity supplied of a good or service at every price; a shift of the supply curve to the left or right
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change in quantity supplied
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a change in the amount of a product that producers offer for sale because of a change in the product's price
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equilibrium price
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the price in a competitive market at which the quantity demanded and the quantity supplied are equal, there is neither a shortage nor a surplus, and there is no tendency for the price to rise and fall
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equilibrium quantity
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1. the quantity demanded and supplied at the equilibrium price in a competitive market
2. the profit-maximizing output of a firm |