Microeconomics Chapter 1 Preliminaries Flashcards

Vocabulary flashcards covering key economic terms and definitions from Chapter 1 Preliminaries.

Microeconomics

Branch of economics that deals with the behavior of individual economic units—consumers, firms, workers, and investors—as well as the markets that these units comprise.

Macroeconomics

Branch of economics that deals with aggregate economic variables, such as the level and growth rate of national output, interest rates, unemployment, and inflation.

Positive Analysis

Analysis describing relationships of cause and effect.

Normative Analysis

Analysis examining questions of what ought to be.

Model

A mathematical representation, based on economic theory, of a firm, a market, or some other entity.

Market

Collection of buyers and sellers that, through their actual or potential interactions, determine the price of a product or set of products.

Market Definition

Determination of the buyers, sellers, and range of products that should be included in a particular market.

Arbitrage

Practice of buying at a low price at one location and selling at a higher price in another.

Perfectly Competitive Market

Market with many buyers and sellers, so that no single buyer or seller has a significant impact on price.

Market Price

Price prevailing in a competitive market.

Extent of a Market

Boundaries of a market, both geographical and in terms of range of products produced and sold within it.

Nominal Price

Absolute price of a good, unadjusted for inflation.

Real Price

Price of a good relative to an aggregate measure of prices; price adjusted for inflation.

Consumer Price Index

Measure of the aggregate price level.

Producer Price Index

Measure of the aggregate price level for intermediate products and wholesale goods.

CAFE Standards

Corporate Average Fuel Economy regulations imposed by the U.S. government designed to improve the average fuel economy of domestically-sold cars and light trucks.