Econ 101 Vocab

A measure of overall cost of goods/services bought by firms

As price changes for each individual goods, consumers change their consumption behavior (buy more of the cheaper goods, substituting the expensive goods), but CPI measurement assumes fixed baskets of goods (quantity of goods bought/sold don't change)

the prices of new goods and the amount of new goods consumed are not included in the CPI measurement (unless we adjust CPI measurement to include the new goods). Intro of new goods makes dollars (money used to buy goods) more valuable in terms of the ability to buy more variety of goods, so CPI doesn't capture this increase in value of dollars thus overstating the inflation.

CPI measurement does not reflect the changes in the dollar value when the quality of the goods changes while the prices remain the same. With an increase in quality of the goods (assuming the price stays the same), the dollar alue increases; the cost of living decreases. However, CPI measurement does not reflect this change of dollar alues, so it would overestate inflation

relects the prices of all goods/services [produced domestically

relfects the prices of all goods/servces bought by consumers

the automatic correction by law or contract of a dollar amoud for the effect of inflation

the interest rate reported without the correction for the effect of inflation

the interest rate reported with a correction for the effect of inflation

the market value of all final goods/services produced within a country in a given period of time

the price that balances quantity supplied and quantity demanded

the quantity (suppled/demanded) at equilibrium price

quantity supplied < quantity demanded

table that shows the relationship between the price of a good/service and the quantity supplied

the amount of goods/services that sellers are willing to sell

the quantity supplied of a good/service rises; certeris parius

table that shows the relationship between the pice of a good and the quantity demanded

the amound of a good that buyers are willing and able to purchase

the quantity demanded of a good rises when the price of the good falls, assuming all else is constant (ceteris paribus)

a group of buyers and sellers of a particular goods/service

a market where thereare many buyers and sellers that each has a negligiable impact on the market price (no one can influence the market price individually, ex the heroic buyer's $10 bid attempt against the market price of $40 from Aplia Experiment)

• land
• time
• income

doesn't equal the net value

opportunity cost + cost

ability to produce goods using fewer inputs than outputs

the ability to produce a good at a lower opportunity cost than others (specialize)

for both parties to gain from trade, the price at which they trade must lie between the opportunity costs