Anything that gives a person a utility or satisfaction.
Is something that gives a person a disutility or dissatisfaction.
The satisfaction one receives from a good.
The disatisfaction one receives from a bad.
4 Resources to Produce Goods?
Land (Natural Resources)
All natural resources such as minerals, forests, water and unimproved land.
The physical and mental talents people contribute to the production process.
Produced goods that can be used as inputs for further production, such as factories, machinery, tools, computers and buildings.
The talent that some people have for organizing land, labor, and capital to produce goods, seek new business opportunities, and develop new ways of doing things.
The condition in which are wants are greater than the limited resources available to satisfy those wants.
The science of scarcity; science of how individuals and societies deal with the fact that wants are greater than the limited resources available to satisfy those wants.
A means of deciding who gets what of available resources and goods.
The most highly valued opportunity or alternative forfeited when a choice is made.
Additional benefits; the benefits connected with consuming an additional unit of a good or undertaking one more unit of activity.
Additional costs; the costs connected with consuming an additional unit of a good or undertaking one more unit of an activity.
Decisions at the Margin?
Decision making characterized by weighing the additional (marginal) benefits of a change against the additional (marginal) costs of a change with respect to current conditions.
The condition when marginal benefits equal marginal costs.
Something that encourages or motivates a person to undertake an action.
The giving up of one thing for something else.
A Latin term meaning "all things constant" or "nothing else changes"
An abstract representation of the real world designed with the intent to better understand it.
The process (used in building a theory) of focusing on a limited number of variables to explain or predict an event.
The study of "what is" in economics.
The study of "what should be" in economics?
The branch of economics that deals with human behavior and choices as they relate to highly aggregate markets (e.g. the goods and services markets) or the entire economy.
The branch of economics that deals with human behavior and choices as they relate to relatively small units; an individual, a firm, an industry, a single market.
Two variables are inversely related if they change opposite ways.
Two variables are directly related if they change in the same way.
Two variables are independent as one changes if the other does not.
The ratio of the change in the variable on the vertical axis to the change in the variable on the horizontal axis.
Gross Domestic Product (GDP)?
The value of the entire output produced annually within a countries borders.
Production Possibilities Frontier (PPF)?
The possible combinations of two goods that can be produced in a certain period of time under the conditions of a given state of technology and fully employed resources.
Law of Increasing opportunity costs?
As more of a good is produced, the opportunity costs of producing that good increase.
The condition where the maximum output is produced with the given resources and technology.
The condition where less than the maximum output is produced with the given resources and technology. Productive inefficiency implies more that more of one good can be produced without any less of another being produced.
The body of skills and knowledge involved in the use of resources in production. An advance in technology commonly increases the ability to produce more output with a fixed amount of resources or the ability to produce the same output with fewer resources.
The situation where someone can produce a good at lower opportunity cost than someone else can.
Law of Demand?
As the price of a good rises, the quantity of demanded of the good falls, and as the price of the good falls, the quantity demanded of the good rises, ceteris paribus.
The numerical tabulation of the quantity demanded of a good at different prices; the numerical representation of the law of demand.
The graphical representation of the law of demand.
Law of Diminishing Marginal Utility?
For a given time period, the marginal (or additional) utility or satisfaction gained by consuming equal successive units of a good will decline as the amount consumed increases.
The price of a good. For example if the price of oranges is $1 this is its own price.
A good for which demand falls (rises) as income rises (falls).
A good for which demand does not change as income rises or falls.
Two goods that satisfy similar needs or desires. If two goods are substitutes, the demand for one rises as the price of the other rises (or the demand for one falls as the price of the other falls).
Two goods that are used jointly in consumption. If two goods are complements, the demand for one rises as the other one falls (or the demand for one falls as the price of the other rises).
The willingness and ability of sellers to produce and offer to sell different quantities of a good at different prices during a specific time period.
Law of Supply?
As the price of a good rises, the quantity supplied of the good rises, and as the price of a good falls, the quantity supplied of the good falls, certeris paribus.
The numerical tabulation of the quantity supplied of a good at different prices; the numerical representation of the law of supply.
A monetary payment by government to a producer of a good or service.
Surplus (Excess Supply)?
A condition in which the quantity supplied is greater than the quantity demanded. Surpluses occur only at prices above the equilibrium price.
Shortage (Excess Demand)?
A condition in which the quantity demanded is greater than the quantity supplied. Shortages occur only at prices below the equilibrium price.
Equilibrium Price (Market-Clearing Price)?
The price at which the quantity demanded of the good meets the quantity supplied.
The quantity that corresponds to the equilibrium price. The quantity at which the amount of the good that buyers are willing to and able to buy equals the amount that sellers are willing and able to sell, and both equal the amount actually bought and sold.
A price other than equilibrium price. A price at which the quantity demanded does not equal the quantity supplied.
A state of either surplus or shortage in a market?
Equilibrium means "at rest". Equilibrium in a market is the price-quantity combination from which buyers or sellers do not tend to move away. Graphically equilibrium is the intersection point of the supply and demand curves.
Consumers Surplus (CS)?
The difference between the maximum price a buyer is willing and able to pay for a good or service and the price actually paid. CS= Maximum buying price-Price paid.
Producers (Sellers) Surplus (PS)?
The difference between the price sellers receive for a good and the minimum or lowest price for which they would have sold the good. PS=Price received-Minimum selling price.
Total Surplus (TS)?
The sum of consumers surplus and producers surplus. CS+PS=TS
The spontaneous and unintended emergence of order out of the self-interested actions of individuals; an unintended consequence of human action, with emphasis placed on the word unintended.
5 Factors that cause shift in demand?
prices of related goods (substitutes & complements)
number of buyers
expectations of future prices
The only factor that can directly cause a change in the quantity demanded of a good is?
The good's own price.
The downward sloping curve is the graphical representation of?
Law of Demand
The upward sloping curve is a graphical representation of?
The law of supply
What drives the market to equilibrium?
Mutual beneficial trade between buyers and sellers drives the market to equilibrium.
When does the law of supply not hold?
When there is no time to produce more units of a good or when goods cannot be produced at all.
A straight-line PPF represents?
constant opportunity costs.
A bowed-outward (concave-downward) PPF represents?
The law of increasing opportunity costs.
Producing goods in which you have a comparative advantage.
A phrase that means before, "as in before a trade".
Phrase that means after, "as in after a trade".
A good for which the demand rises (falls) as income rises (falls) (direct relation).
7 Causes of shift in Supply Curve?
Prices of relevant sources
Prices of other goods
Number of sellers
Expectation of future prices
Taxes and subsidies
Resources are referred to as...?
inputs or factors of production.
3 effects of scarcity?
The need to make choices
The need for a rationing device
Competition exists because of..?
Zero price doesn't mean zero cost. T/F ?
Economic problems are usually caused by what 2 things?
Market or Government.
2 major factors to affect economic growth are?
Advance in Technology
increase in the quantity of resources
Change in Demand=?
Shift in Demand curve
Change in quantity demanded=?
A movement from one point to another point on the same demand curve caused by a change in the price of the good.
Increase in Demand means?
It means individuals are willing and able to buy more units of the good at each and every price.
_____ of what we subsidize and ____ of what we tax.
More of what we subsidize and less of what we tax.