1. What is scarcity?
    It is the limited nature of resources
  2. What is economics?
    The study of how society manages it's scarce resources
  3. What is efficiency?
    It is the property of society getting the most it can from it's scarce resources
  4. What is equaltiy?
    it is the property of distributing economic prosperity uniformly among the members of society
  5. What are rational people?
    people who systematically and purposefully do the best they can to acheive their objectives
  6. What are marginal changes?
    Small incremental adjustments to a plan of action
  7. What is an incentive?
    something that induces a person to act
  8. What is a market economy?
    an economy that allocates resources throught the decentralized descisions of many firms and households as they interact in markets for goods and services
  9. What are property rights?
    the ability of an individual to own and exercise control over scarce resources
  10. What is a market failure?
    a situation in which a market left on its own fails to allocate resources efficiently
  11. What is an externality?
    action takes place that cause spill-over effect on non-consenting 3rd parties
  12. What is market power?
    the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices
  13. What is productivity?
    the quanitity of goods and services produced from each unit of labor input
  14. What is inflation?
    an increase in the overall level of prices in the economy
  15. hyper-inflation
    inflation rising at a rapid rate
  16. What is a business cycle?
    fluctuations in economic activity, such as employment and production
  17. What is a Circular-flow diagram?
    A visual model of the economy that shows how dollars flow through makerts among households and firms
  18. What is production possiblities frontier?
    a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology
  19. What is microeconomics?
    the study of how households and firm make decisions and how they interact in markets
  20. What is macroeconomics?
    the study of economy wide phenomena, including inflation, unemployment, and economic growth
  21. What is a postive statement?
    claims that attempt to describe the world as it is
  22. What is a normative statement?
    Claims that attempt to prescribe how the world should be
  23. What is absolute advantage?
    the ability to produce a good using fewer inputs than another producer
  24. What is opportunity cost?
    whatever must be given up to obtain some item
  25. What is comparative advantage?
    the ability to produce a good at lower opportunity cost than another producer
  26. What are imports?
    goods produced abroad and sold domestically
  27. What are exports?
    goods produced domestically and sold abroad
  28. What is a market?
    a group of buyers and sellers of a particular good or service
  29. What is a competive market?
    a market in which there are many buyers and many sellers so that each has a negligible impact on the market
  30. What is quantity demanded?
    the amount of a good that buyers are willing and able to purchase
  31. What is law of demand?
    claim that other things equal, when the price of a good rises, the quanitity demanded of the good falls, and when prices fall, the quanitity demanded rises

    increase of price of product>decrease quantity demanded>vice versa
  32. What is demand schedule?
    a table that show the relationship b/w the price of a good and quantity demanded
  33. What is demand curve?
    a graph of the relationship b/w price of a good and the quantity demanded
  34. What is normal good?
    if the demand of the good falls when income falls
  35. what is inferior good?
    if demand for good rises when income falls
  36. substitutes?
    two goods for which an increase in the price of one leads to an increase in the demand for the other
  37. what is complements?
    two goods for which an increase in price of one leads to a decrease in the demand for the other
  38. quantity supplied
    the amount of a good that sellers are willing and able to sell
  39. law of supply
    claim that, other things equal, the quanitity supplied of a good rises when the price of the good rises
  40. supply schedule
    a table that shows the relationship b/w the price of a good and the quantity supplied, holding constant everything else that influences how much producers of the good want to sell
  41. supply curve
    curve relating price and quantity supplied
  42. equilibrium
    situation at which market price has reached quantity supplied equals quantity demanded
  43. equllibrium price
    the price that balances quantity supplied and quantity demanded
  44. equilibrium quantity
    the quantity supplied and the quantity demanded at the equilibrium price
  45. surplus
    a situation in which quantity supplied is greater than quantity demanded
  46. shortage
    a situation in which quantity demanded is greater than quantity supplied
  47. law of supply and demand
    claim that the price of any good adjusts to bring the quantity supplied and quantity demanded for that good into balance
  48. elasticity
    a measure of the responsiveness of quantity demanded or quantity supplied to one of it's determiants
  49. price elasticity of demand
    a measure of how much quantity demanded of a good responds to a change in price of that good, computed as the % change in quantity demanded divided by the % change in price
  50. total revenue
    the amount paid by buyers and recieved by sellers of the good.
  51. Factors that change Demand
    • 1) prices of related products
    • A)Substitute: decrease in price Canada Dry>demand decrease for B gingergale
    • B)Complement: increase....
    • 2)Taste and Preferences-seasonal
    • increase D if advertising
    • 3)Income
    • A) increase in income, increase of DBGA-normal good
    • B)increase income, decrease Demand of ramen noodles-inferior good
    • 4)Expected future prices
    • Price decrease, Demand decrease
    • 5)# Buyers (consumers)
    • increase Buyers, increase demand for products
Card Set
exam one-Chapters 0ne-Five