ECON 2105 Exam #1, Macro Econ exam 1 2105

capital goods

goods that help produce other valuable goods and services in the future

ceteris paribus

the concept under which economists examine a change in one variable while holding everything else constant

comparative advantage

the situation where an individual, business, or country can produce at a lower opportunity cost than a competitor can

competitive market

one in which there are so many buyers and sellers that each has only a small impact on the market price and output

consumer goods

goods produced for present consumption

consumer surplus

the difference between the willingness to pay for a good and the price that is paid to get it

demand schedule

a table that shows the relationship between the price of a good and the quantity demanded

economics

the study of how people allocate their limited resources to satisfy their nearly unlimited wants

incentives

factors that motivate a person to act or exert effort

inputs

the resources (labor, land, and capital) used in the production process

law of demand

the law that, all other things being equal, quantity demanded falls when prices rise, and rises when prices fall

law of increasing relative cost

law stating that the opportunity cost of producing a good rises as a society produces more of it

law of supply

the law that, all other things being equal, the quantity supplied of a good rises when the price of the good rises, and falls when the price of the good falls

law of supply and demand

the law that the market price of any good will adjust to bring the quantity supplied and the quantity demanded into balance

macroeconomics

the study of the overall aspects and workings of an economy

marginal thinking

the evaluation of whether the benefit of one more unit of something is greater than its cost

market

a system that brings buyers and sellers together to exchange goods and services

market demand

the sum of all the individual quantities demanded by each buyer in the market at each price

market economy

an economy in which resources are allocated among households and firms with little or no government interference

opportunity cost

the value of the next best option foregone by making a choice- ex; what is given up

scarcity

the limited nature of society's resources, given society's unlimited wants and needs

surplus

market condition when the quantity supplied of a good is greater than the quantity demanded

trade

the voluntary exchange of goods and services between two or more parties

production model

describes economics inputs like technology, capital and labor are used to affect output.

freedom index

right of every human to control their own labor and property

factors of production

natural resources, labor, capital

institutions

govern and shape economic behavior and outcomes

entreprenuar

Someone who take a risk for a profit

Capital

money for investment

labor

to work

natural resources

Raw materials supplied by nature

choice

the act of selecting among alternatives

fundemental economic questions

What to produce? How to produce? For whom to produce?

wants, resources

Wants are unlimited. Resources are limited.

value

not limited to the purchase price

Economics as a Science

Economists try to examine relationships between variables

Positive Statements

Based on facts. Avoids value judgements (what is).

Normative Statements

includes value judgements (what ought to be)

patents

exclusive rights to make or sell inventions