Macroecon Chp 1-3 definitions
Terms
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- Scarcity
- The situation in which unlimited wants exceed the limited resources available to fulfill those wants.
- Economics
- The study of the choices people make to attain their goals, given their scarce resources.
- Economic model
- Simplified versions of reality to analyze real world economic situations.
- Market
- A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade
- Marginal analysis
- Analysis that involves comparing marginal benefits and marginal costs
- Trade off
- The idea that because of scarcity, producing more of one good or services means producing less of another good or service.
- Centrally planned economy
- An economy in which the government decides how economic resources will be allocated.
- Market economy
- An economy in which the decisions of households and firms interacting in markets allocate economic resources.
- Mixed economy
- an economy in which most economic decisions result from the interaction of buyers and seller in markets, but in which the government plays a significant role in the allocation of resources.
- Productive efficiency
- The situation in which a good or service is produced at the lowest possible cost.
- Allocative efficiency
- A state of the economy in which production reflects consumer preferences; in particular, every good or services is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it.
- Voluntary exchange
- The situation that occurs in markets when both te buyer and seller of a product are made better off by the transaction.
- Equity
- The fair distribution of economic benefits
- Economic variable
- Something measurable that can have different values, such as the wages of software programmers
- Positive analysis
- Analysis concerned with what is
- Normative analysis
- Analysis concerned with what ought to be
- Microeconomics
- The study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices
- Macroeconomics
- The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth
- Production possibilities frontier
- A curve showing the maximum attainable combinations of two products that may be produced with available resources
- Opportunity cose
- The highest-valued alternative that must be given up to engage in an activity
- Economic growth
- The ability of the economy to produce increasing quantities of good and services
- Trade
- The act of buying or selling
- Absolute advantage
- The ability of an individual, firm, or country to produce more of a good or service than competitors using the same amount of resources
- Comparative advantage
- The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than other producers
- Product markets
- Markets for goods-such as computers-and services-such as medical treatment.
- Factor markets
- Markets for the factors of production, such as labor, capital, natural resources, and entrepreneurial ability
- Circular-flow design
- A model that illustrates how participants in markets are linked
- Free market
- A market with few government restrictions on how a good or service can be produced or sold, or on how a factor of production can be employed
- Entrepreneur
- Someone who operates a business, bringing together the factor of production-labor, capital, and natural resources-to produce goods and services
- Demand schedule
- A table showing the relationship between the price of a product and the quantity of the product demanded
- Demand curve
- A curve that shows the relationship between the price of a product and the quantity of the product demanded
- Market demand
- The demand by all the consumers of a given good or service
- Law of demand
- Holding everything else constant, when the price of a product falls, the quantity demanded of the product will increase, and when the price of a product rises, the quantity demanded of the product will decrease
- Substitution effect
- The change in the quantity demanded of a good that results from a change in price making the good more or less expensive relative to other goods that are substitutes
- Income effect
- The change in the quantity demanded of a good that results from the effect of a change in the good's price on consumer purchasing power
- Ceteris paribus ("All else equal")
- The requirement that when analyzing the relationship between two variable-such as price and quantity demanded-other variables must be held constant
- Substitutes
- Goods and services that can be used for the same purpose
- Complements
- Goods that are used together
- Normal good
- A good for which the demand increases as income rises and decreases as income falls
- Inferior good
- A good for which the demand increases as income falls, and decreases as income rises
- Demographics
- The characteristics of a population with respect to age, race, and gender
- Quantity supplied
- The amount of a good or service that a firm is willing and able to supply at a given price
- Supply schedule
- A table that shows the relationship between the price of a product and the quantity of the product supplied
- Supply curve
- A curve that shows the relationship between the price of a product and the quantity of the product supplied
- Law of supply
- Holding everything else constant, increases in price cause increases in the quantity supplied, and decreases in price cause decreases in the quantity supplied
- Technological change
- A positive or negative change in the ability of a firm to produce a given level of output with a given amount of inputs
- Market equilibrium
- A situation in which quantity demanded equals quantity supplied
- Competitive market equilibrium
- A market equilibrium with many buyers and many sellers
- Surplus
- A situation in which the quantity supplied is greater than the quantity demanded
- Shortage
- A situation in which the quantity demanded is greater than the quantity supplied