MacroEcon Ch. 1-3 Exam
Terms
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- macroeconomics
- looks at the economy as a whole or its major aggregates.
- How will the system accommodate change?
- Fundamental Economics Question #4
- What goods and services will be produced?
- Fundamental Economics Question #1
- How will the system promote progress?
- Fundamental Economics Question #5
- substitute goods
- 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; conversely, when the price of one product rises, the demand for the other product rises.
- allocative efficiency
- the apportionment of resources among firms and industries to obtain the production of the products most wanted by society (consumers); the output of each product at which its marginal cost and price or marginal benefit are equal
- division of labor
- the separation of work required to produce a product into a number of different tasks that are performed by different workers; specialization of workers
- economic models
- simplified pictures of economic reality; abstract generalizations
- marginal cost
- the extra cost of producing one more unit of output; equal to the change in total cost divided by the change in output
- microeconomics
- examines specific economic units or institutions.
- factors that shift supply and demand
- Consumer tastes, the number of buyers on the market, the money incomes of consumers, the prices of related goods, and consumer expectations
- How will the goods and services be produced?
- Fundamental Economics Question #2
- positive economics
- analysis deals with facts
- surplus
- the amount by which the quantity supplied of a product exceed the quantity demanded at a specific (above-equilibrium) price
- opportunity cost
- the amount of other products that must be forgone or sacrificed to produce a unit of a product
- normative economics
- reflects value judgments (i.e. how things should be)
- marginal benefit
- the extra (additional) benefit of consuming 1 more unit of some good or service; the change in total benefit when 1 more unit is consumed
- shortage
- the amount by which the quantity demanded of a product exceeds the quantity supplied at a particular (below-equilibrium) price
- productive efficiency
- the production of a good in the least costly way; occurs when production takes place at the output at which average total cost is a minimum, and marginal product per dollar's worth of input is the same for all inputs
- complementary goods
- products and services that are used together. When the price of one falls, the demand for the other increases (and inversely)
- normal profit
- the payment made by a firm to obtain and retain entrepreneurial ability; the minimum income entrepreneurial ability must receive to induce it to perform entrepreneurial functions for a firm
- economic profit
- (total revenue minus total cost) indicates that an industry is prosperous and promotes its expansion.
- Who will get the goods and services?
- Fundamental Economics Question #3
- slope of a line
- the ratio of the vertical change (the rise or fall) to the horizontal change (the run) between any two points on a line. The slope of an upward-sloping line is positive, reflecting a direct relationship between two variables; the slope of a downward-sloping line is negative, reflecting an inverse relationship between two variables.