Midterm
Terms
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- production possibilities frontier
- the line on a production possibilities graph that shows the maximum possible output
- minimum wage
- a minimum price that an employer can pay a worker for an hour of labor
- marginal cost
- the cost of producing one more unit of a good
- market economy
- economic sytem in which decisions on production and consumption of goods and services are based on voluntary exchange in markets
- demand
- the desire to own something and the ability to pay for it
- law of increasing costs
- law that states that as we shift factors of production from making one good or service to another, the cost of producing the second item increases
- demand curve
- a graphic representation of a demand schedule
- inelastic
- describes demand that is not very sensitive to a change in price
- physical capital
- all human-made goods that are used to produce other goods and services; tools and buildings
- variable cost
- a cost that rises or falls depending on how much is produced
- elastic
- describes demand that is very sensitive to a change in price
- deregulation
- the removal of some government controls over a market
- inferior good
- a good that consumers demand less of when their incomes decrease
- trade-off
- an alternative that we sacrifice when we make a decision
- price floor
- a minimum price for a good or service
- human capital
- the skills and knowledge gained by a worker through education and experience
- thinking at the margin
- deciding whether to do or use one additional unit of some resource
- centrally planned economy
- economic system in which the central government makes all decisions on the production and consumption of goods and services
- scarcity
- limited quantities of resources to meet unlimited wants
- fixed cost
- a cost that does not change, no matter how much of a good produced
- labor
- the effort that people devote to a task for which they are paid
- total revenue
- the total amount of money a firm receives by selling goods or services
- demand schedule
- a table that lists the quantity of a good a person will buy at each different price
- land
- natural resources that are used to make goods and services
- opportunity cost
- the most desirable alternative given up as the result of a decision
- elasticity of supply
- a measure of the way quantity supplied reacts to a change in price
- microeconomics
- the study of the economic behavior and decision making of small units, such as individuals, families, and businesses
- normal good
- a good that consumers demand more of when their incomes increase
- competition
- the struggle among producers for the dollars of customers
- business cycle
- a period of macroeconomic expansion followed by a period of contraction
- regulation
- government intervention in a market that affects the production of a good
- macroeconomics
- the study of the behavior and decision making of entire economies
- rationing
- a system of allocating scarce goods and services using criteria other than price
- price ceiling
- a maximum price that can be legally charged for a good or service
- factors of production
- land, labor, and capital; the three groups of resources that are used to make all goods and services
- incentive
- an expectation that encourages people to behave in a certain way
- monopoly
- a market dominated by a single seller
- guns or butter
- a phrase that refers to the trade-offs that nations face when choosing whether to produce more or less military or consumer goods