Econ #1
Terms
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- law of increasing opportunity cost
- the principle that the opportunity cost increases as production of one output expands
- Three fundamental economic questions
- What products will be produces? How will they be produced? For whom will they be produced?
- land
- a shorthand expression for any natural resources provided by nature
- public good
- good or service with: 1. users collectively consume benefits 2. there is no way to bar people who don't pay for consuming the good or service
- opportunity cost
- the best alternative sacrificed for a chosen alternative
- resources
- the basic categories of inputs used to produce good ans services; also called factors of production; divided into land, labor and capital
- change in quantity of demanded
- a movement between points along a stationary demand curve, ceteris paribus
- inferior good
- any good for which there is an inverse relationship between changes in income and its demand curve
- price floor
- a legally established minimum price a seller can charge
- change in demand
- increase or decrease in the quantity demanded at each possible price; increase causes rightward shift in the entire curve; decrease causes leftward shift in the entire curve
- supply
- a curve or schedule showing the various quantities of of product sellers are willing to produce and offer for sale at possible prices during a specified period of time, ceteris paribus
- independent relationship
- zero association between two variables; if one changes the other stays the same
- model
- a simplified description of reality used to understand and predict the relationship between variables
- entrepreneurship
- creative ability of individuals to seek profits by taking risks and combining resources to produce innovative products
- externality
- a cost of benefit imposed on people other than the consumers or producers of good or service
- capital
- the physical plants, machinery and equipment used to produce other goods; human-made goods that don't directly satisfy human wants
- substitute good
- a good that competes with another good for consumer purchases; as a result there is a direct relationship between a price change and for a good and the demand for its competitor goods
- change in quantity supplied
- a movement between points along a stationary supply curve, ceteris paribus
- slope
- ratio of the change in the variable on vertical axis (rise or fall) to the change on horizontal axis (run)
- macroeconomics
- branch of economics that studies decision making for the economy as a whole
- price system
- a mechanism that used he forces of supply and demand to create an equilibrium through rising and falling prices
- production possibilities curve
- a curve that shoes the maximum combination of two outputs an economy can produce in a given time period with its available resources and technology
- complimentary good
- a good that is jointly consumed with another good; as a result, there is an inverse relationship between a price change for one good and the demand for its "go together"good
- equilibrium
- a market condition that occurs at any price and quantity where the quantity demanded and the quantity supplied are equal
- market failure
- a situation in which market equilibrium results in too few or too many resources used in the production of a good or service; this inefficiency may justify government intervention
- shortage
- a market condition existing at any price where the quantity supplied is less than the quantity demanded
- economics
- study of how society chooses to allocate its scarce resources to the production of goods and services in order to satisfy unlimited wants
- normal good
- any good for which there is a direct relationship between changes in income and its demand curve
- direct relationship
- positive association between two variables; if one goes up or down, the other goes up or down
- inverse relationship
- negative association between two variables; if one goes up, the other goes down, vice-verse
- microeconomics
- branch of economics that studies decision making by a single individual, household, firm, industry or level of government
- normative economics
- an analysis based on value judgment - opinion
- investment
- the accumulation of capital, such as factories, machines and inventions that is used to produce goods and services
- technology
- body of knowledge applied to how goods are produced
- price ceiling
- a legally established maximum price a seller can charge
- labor
- the mental and physical capacity of workers to produce good and services
- change in supply
- an increase or decrease in the quantity supplied at each possible price; increase causes a rightward shift and decrease causes a leftward shift
- market
- any arrangement in which buyers and sellers interact to determine the price and quantity of good and services exchanged
- scarcity
- the condition in which human wants are forever greater than the available supply of time, goods and resources
- positive economics
- an analysis limited to statements that are verifiable - can be proven true or false
- economic growth
- the ability of an economy to produce greater levels of output, represented by an outward shift of its PPCl; also an expansion in nation output measured by the annual percentage increase in a nations GDP
- ceteris paribus
- latin phrase meaning that while certain variables change all other things remain unchanged
- marginal analysis
- an examination of the effects of additions to or subtractions from a current situation
- surplus
- a market condition existing at any price where the quantity supplied is greater than the quantity demanded