Microeconomics Terms Exam 1
Terms
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- Economics
- study of the allocation of scarce resources among competing ends
- scarcity
- our inability to satisfy all our wants
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- adf
- what are the four factors of production?
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land - natural resources
labor- people
capital - tools, machines, and buildings firms use to produce goods/services
entrepreneurship - human resources that organizes it all - study of the performance of the choices individuals make, the ways these choices interact in markets, and the influence of governments
- Microeconomics
- the study of the performance of the national economy and the global economy. It focuses on a market for all goods and services, the behavior of the business sector of the whole
- Macroeconomics
- highest valued alternative forgone
- Opportunity Cost
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-boundary between those combination of goods and services that can be produced and those that cannot - -production possibilities frontier (PPF)
- activity that a person can perform at a lower opportunity cost than all others
- comparative advantage
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-higher the price of a good the smaller the quantity demanded is
-inverse relationship between the price of a good and the quantity demanded - law of demand
- quantity demanded exceeds the quantity supplied
- shortage (excess demand)
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-the higher the price of a good, the higher quantity supplied
-direct relationship between the price of a good and the quantity supplied - law of supply
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when quantity supplied exceeds the quantity demanded
- surplus (excess supply)
- price at which the quantity demanded meets the quantity supplied
- equilibrium price
- difference between price consumer is willing to pay and price actually paid
- consumer surplus
- difference between price received y producer and the price the producer would have been willing to produce the good at
- producer surplus
- consumers and producers pursue their own self interest and interact in markets causing the market to be the most efficient
- competitive markets
- regulation that makes it illegal to charge a price higher than a specified level
- price ceiling
- when a price ceiling is applied to the housing market
- rent ceiling
- what does a rent ceiling cause?
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-housing shortage
-increased search activity (opp cost)
-black market - regulation that makes it illegal to trade at a price lower than a specified level
- price floor
- when a price floor is applied to the labor market
- minimum wage
- minimum wage causes
- unemployment aka surplus of labor
- when prices effect demand
- price elasticity