Economics Ch 3

  1. law of demand
    • an inverse relationship between the price of a good and the quantity of its buyers
    • price increase, buyers purchase less
    • price decrease, buyers buy more
  2. substitutes
    products that serve same purpose
  3. consumer surplus
    difference between max price consumers are willing to buy
  4. complements
    • products usually consumes jointly
    • decrease of price of one will cause an increase in demand for the other
  5. opportunity cost of production
    • total economic cost of producing a good service
    • equal to the value of the production of other goods sacrificed as the result of producing the goods
  6. profit
    • excess of sales revenue relative to the opportunity cost of production
    • acrues when value of the good produced is greater than the value of the resources
  7. loss
    • deficit of sales revenue relative tot he opportunity cost of production
    • penalty imposed on those who produce goods even though their value is less than the resources
  8. law of supply
    states that direct relationship between the price of a good and quantity of its producers are willing to supply
  9. producer surplus
    • difference between the price suppliers actually receive and the minimum price they willing to accept
    • measure the net gains to producers and resource suppliers
  10. market
    • abstract concept encompassing the forces of supply and demand
    • interaction of buyers and sellers
  11. equillibrium
    • conflicting forces of supply and demand are in balance
    • decision of consumers and producers are brought into harmony with one another
  12. economic efficiency
    • potential gains from trade have been realized
    • creates more benefit than cost
  13. invisible hand principle
    direct individuals pursuing their own interests to engage in activities promoting the economic well-being
Card Set
Economics Ch 3
Economics class @NU