AP Economics stuff
Terms
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- factors of production
- land, labor, capital, and entrepreneurial ability
- land
- all natural resources used in the production precess
- efficiency
- the property of society getting the most from its scarce resources
- marginal analysis
- comparisons of marginal benefits and marginal costs, usually for decision making
- incentive
- something that induces a person to act
- diminishing marginal utility
- each buyer of a product will derive less utility from each sucessive unit consumed
- competition
- what drives a market based system
- income elasticity of demand
- measures the degree to which consumers respond to a change in their incomes by buying more or less of a particular good
- short run
- in microeconomics is a period of time too short to change plant capacity but long enough to use fixed plant more or less intesively
- macroeconomics
- the study of economy wide phenomena
- change in demand
- shift of demand curve
- price floor
- a minimum price a seller may charge for a product or service (must be set below equilibrium to have an effect0
- market power
- the ability of an individual or group to substantially influence market prices
- cross elasticity of demand
- measures how sensitive consumer purchases of one product are to a change in the price of some other product
- economic system
- a particular set of institutional arrangements and a coordinating mechanism
- scientific method
- objective development and testing of theories
- externality
- when one persons actions have an impact on a bystander
- rational
- systematically and puposefully doing the best you can to achieve your objective
- surplus
- (excess supply) left overs after a price floor has been set above equilibrium price
- property rights
- the ability of an individual to own and exercise control over scarce resources
- price elasticity of demand
- the responsivness of consumers to price change
- monopoly
- the case in which there is only one seller in the market
- full employment
- the economy is employing all its available resources
- capital
- all manufactured aids used in producing consumer goods
- scarcity
- limited resources and unlimited wants
- positive economics
- descriptions of the world as it is
- opportunity cost
- whatever is given up to get something else
- inflation
- an increase in the overall level of prices
- private property
- enables individuals and businesses to obtain, use, and dispose of resources as they see fit
- economic growth
- result of increases in supplies of resources, improvements in resource quality, or technological advances
- factors of production
- inputs such as land, labor, and capital
- market system
- capitalism: characterized by pricate ownership of resources and the use of markets and prices to coordinate and direct economic activity
- determinants of supply
- (1) resource prices, (2) technology, (3) taxes and subsidies, (4) prices of other goods, (5) producer expectations, (6) number of sellers in the market
- change in quantity supplied
- movement along the supply curve
- total revenue
- the total amount the seller receives from the sale of a product in a particular time period
- elastic
- specific percentage change in price results in larger percentage change in quantity demanded
- circular-flow diagram
- a diagram showing the flow of goods etc between housebolds and firms
- consumer goods
- products that satisfy our wants directly
- unit elasticity
- where pecentage change in price and quantity demanded are the same
- law of supply
- direct relationship between the price of a good and the quantity supplied
- marginal changes
- incremental adjustments to an existing plan
- producer surplus
- the difference between the actual price a producer receives and the minimum acceptable price
- utility
- the pleasure, happines, or satisfaction obtained from consuming a good or service
- market period
- the period that occurs when the time immediately after a change in market price is too short for producers to respond
- fallacy of composition
- the assumption that what is true for one individual is necessarily true for a group of individuals
- economics
- study of how society manages its scarce resources
- self-interest
- the motivation force of the various economic units as they express their free choices
- market economy
- an economic system where interaction of households and markets determines the allocation of resources
- equity
- the property of distributing economic prosperity fairly among society's members
- long run
- in microeconomics is a time period long enough for firms to adjust their plant sizes and for new firms to enter the industry
- law of demand
- the inverse relationship between the price of a good and the quantity demanded
- change in quantity demanded
- movement along the supply curve
- production possibilities frontier
- a graph that shows the comibations of output the economy can possibly produce given the available factors of production and the available production technology
- normal good
- products whose demand varies directly with money income
- invisible hand
- the principle that self-interested market participants may unknowingly maximize the welfare of society as a whole
- change in supply
- shift of the supply curve
- efficiency losses
- reductions of combined consumer and producer surplus associated with underproduction or overproduction of a product
- shortage
- (excess demand) result of a price ceiling below equilibrium price
- specialization
- specialization is the use of resources of an individual, firm, region, or nation, to produce one or a few goods or services
- perfectly elastic
- when change in price results in no change whatsoever in quantity demanded
- market failure
- a situation in which the market fails to allocate resources efficiently
- determinants of demand
- (1) consumers tastes (preferences), (2) the number of potential buyers in the market, (3) consumers income, (4) price of complement, (5) price of substitute, (6) consumer expectations
- labor
- physical and mental talents of individuals used in producing goods and services
- command system
- socialism or communism: government owns most property resources and economic decision making occurs through a central economic plan
- inelastic
- percentage change in price produces smaller percentage change in quantity demanded
- aggregate
- collection of specific economic units treated as if they were one unit
- consumer surplus
- the difference between the maximum price a consumer is willing to pay for a product and the actual price
- economic models
- simplifications of reality based on assumptions
- complementary good
- a good that is used together with another good
- micro economics
- the study of how households and firms make decisions and how they interact in markets
- substitute good
- a good that can be used in the place of another
- normative economics
- prescription for how the world ought to be
- business cycle
- fluctuations in economic activity
- inferior good
- goods whose demand varies inversely with money income
- price ceiling
- sets the maximum legal price a seller may charge for a produce or service (must be set below equilibrium to have effect)
- price elasticity of supply
- depends how easily producers can shift resources between alternative uses
- equilibrium quantity
- the intersection between the demand and supply curve
- productivity
- the amount of goods and services produced per hour by a worker