Econ 2010 Midterm 1 Terms

  1. Marginal changes
    Small incremental changes to a plan of action
  2. Economics
    Study of how society manages its scarce resources
  3. Market economy
    Economy that allocates resources through dercentralized decisions of many firms and households as they interact in markets for goods and services
  4. Property rights
    Ability of individual to own and excercise control over scarce resources
  5. Market failure
    Situation in which a market left on its own fails to allocate resoyrces efficiently
  6. Externality
    Impact of one person's actions on the well-being of a bystander
  7. Market power
    Ability of single person/grupp to have substantial influence on market prices
  8. Productivity
    Quantity of goods and services produced from each unit of labor
  9. Business cycle
    Fluctuations in econ activity such as employment and production
  10. Inflation
    Increase in overall level of prices in economy
  11. Positive statements
    How world is
  12. Normative statements
    How world should be
  13. Feasible on PPF
    On and inside
  14. Efficient on PPF
  15. Opportunity cost
    Negative slope of PPF
  16. PPF Bowed Out
    Econ is increasing
  17. Resources change. PPF?
    Shift up/down. Slope is constant.
  18. Absolute advantage
    Use less resources to produce same amt. Indicates how country's econ will do. Doesn't explain how trade will occur.
  19. Comparative advantage
    Ability to produce at lower OC. In trade, each country will specialize in product with CA.
  20. Market
    Buyers and sellers of a good or service
  21. Competitive market
    No single buyer/seller can influence market outcome
  22. Perfectly competitive market
    Many buyers and sellers. No single individual can influence price. Free entry/exit. No difference in product quality.
  23. Law of Demand
    As price increases, demand decreases
  24. Inverse demand function
    P = a - bQd
  25. Demand function
    Qd = c - bP
  26. Demand shifters
    • Income
    • Price or related goods
    • Taste
    • Expectations
    • Number of buyers
  27. Supply function
    Q = a + bP
  28. Inverse supply function
    P = c + dQ
  29. Supply shifters
    • Price of inputs
    • Tech
    • Expectations
    • Number of sellers
  30. Equilibrium
    Market price has reached Qs = Qd
  31. Elasticity
    Responsiveness of Qd and Qs to one of their determinants
  32. Elasticity determinants
    • Availability of subs
    • Neccessities v luxuries
    • Definition of market
    • Time horizon
  33. Elasticity is usually
  34. Inelastic (demand)
    Ed < 1
  35. Income elasticity of demand
    Qd / I
  36. Cross-price elasticity
    Qd / P
  37. Price elasticity of supply
    Qs / P
  38. Inelastic (supply)
    Es < 1
  39. Price ceiling
    Legal max on price
  40. Price floor
    Legal min on price
  41. Per unit tax
    For each unit sold, t dollars given to govt
  42. Welfare economics
    Study of how allocation of resources affects economic well-being
  43. Willingness to pay
    Max amt a buyer will pay
  44. Consumer surplus
    WTP - price
  45. Cost
    Value of everything (ie time) needed to produce a good
  46. Producer surplus
    Price - cost
  47. Dead weight loss
    Fall in total surplus that results from market distortion
Card Set
Econ 2010 Midterm 1 Terms
Econ 2010 Fall 2010 Midterm 1 Terms