Econ Midterm 2
Terms
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- Economics
- Study of choice under conditions of scarcity
- Scarcity
- the conditions under which the amount of something available is insufficient to satisfy the desire for it
- what are the biggest elements of scarcity?
- time and spending power
- Labor
- time human beings spend producing goods and services
- Capital
- Something long-lasting used to make other things of value
- Psysical capital
- machinery and equipment and buildings etc
- Human capital
- skills and knowledge possessed by workers
- Capital stock
- total amount of capital at a nation's disposal at any point in time
- Land/Natural resources
- pre-existing "gifts of nature"
- Entrepeneurship
- an individual's ability to combine the other resources into a productive enterprise
- Innovater
- comes up with the original idea for a business
- Risk taker
- provides funds for a business
- allocation
- choosing which desire will be fulfilled
- Input
- anything used to produce a good or a service
- Mircoeconomics
- concerned with the beheivor of individual actors on the economic stage
- Macroecomics
- Looks at the overall view of the economy
- Positive economics
- simply tells how the economy works
- Normative economics
- provides a judgement as to how the economy works
- Model
- abstract representation of reality
- simplyfying assumption
- way of making a model simplier without changing its conclusion
- Critical assumption
- affects the conclusion of a model
- Oppertunity cost
- what we give up of the next best option to make a choice
- Explicit cost
- monetary costs
- Implicit costs
- costs that don't involve money such as time
- productive inefficiency
- when a firm could produce more of a good without pulling resources from another
- Specialization
- each person/firm concentrates on a limited number of productive activities
- Exchange
- trading with others to obtain what we desire
- Market
- a collection of buyers and seller who have the potential to trade with one another
- economic system
- allocates resources and creates a mode of ownership
- aggregation
- combining a group of distinct things into a single whole
- Imperfectly competitive markets
- individual buyers or sellers can influence the price of the product
- Perfectly competitive market
- each buyer and seller takes the market price as a given
- Law of demand
- when price rises and everything else remains the same, quantity demanded must fall
- wealth
- total value of everything you own minus everything you owe
- substitute
- good that can be used in place of another good
- supply
- specific amound of a good that a supplier would choose to see over a period of time given price and other constraints
- law of supply
- when the price of a good rises and everything else remains the same, the quantity supplied will also rise
- alternate good
- another good a firm could produce
- short run elasticity
- elasticity measured shortly after a price change
- long run elasticity
- elasticity measured a year or more after a price change
- Income elasticity of demand
- the percentage change in quantity demanded caused by a 1% change in income
- Economic necessity
- a good with an income elasticity of demand greater than 1
- Cross price elasticity of demand
- the percentage change in the quantity demanded of one good caused by a 1% change in the price of another good
- Price elasticity of supply
- the percentage change in quantity of a good caused by a one percent change in price
- Excise tax
- tax on a particular good or service
- Incidence
- division of a tax payment between buyers and sellers
- Tax shifting
- when a tax imposed on one side of the market ends up being paid by the other side
- Budget constraint
- identifies which combinations of goods and services the consumer can afford with a limited budget
- Relative price
- the price of one good compared to another good
- Utility
- quantitative measure of pleasure of satisfaction obtained from consuming a good
- Marginal utility
- change in utility that an individual enjoys from increasing consumption
- indifference curve
- represents all combinations of 2 goods that make the consumer equally well off
- marginal rate of substitution
- amount of a good that a consumer would give up for a different good