ECO 2023 Exam 1 Concepts and Questions

A comprehensive set of flashcards covering key concepts of Microeconomics from the lecture notes.

Economics

A social science that studies how society allocates scarce resources and makes choices.

Scarcity

The concept that there is less of a good freely available than what individuals would like, leading to rationing.

Opportunity Cost

The value of the next best alternative that is forgone when making a decision.

Human Capital

Productive knowledge and skill of individuals used as inputs in production.

Marginal Decision Making

The process of weighing decisions based on the additional effect of an additional unit.

Utility

The subjective benefit or satisfaction a person expects from a choice or course of action.

Trade

The exchange of goods and services that allows individuals to consume more than they would otherwise.

Positive Economics

Economics that describes the way things are; can be tested and verified.

Normative Economics

Economics that deals with what ought to be; involves value judgments and is not testable.

Ceteris Paribus

A Latin phrase meaning 'all other things being equal', used to isolate causal relationships.

Market Equilibrium

The condition where quantity supplied equals quantity demanded.

Law of Demand

As the price of a good increases, quantity demanded decreases and vice versa.

Supply Schedule

A table showing the relationship between the price of a good and the quantity supplied.

Law of Supply

If the price of a good increases, the quantity supplied of that good also increases.

Consumer Surplus

The difference between what consumers are willing to pay for a good and what they actually pay.

Producer Surplus

The difference between the price a seller receives for a good and the minimum price they are willing to accept.

Economic Surplus

The total surplus to society, calculated as consumer surplus plus producer surplus.

Elasticity

A measure of how much the quantity demanded or supplied of a good responds to changes in price.

Comparative Advantage

The ability to produce a good at a lower opportunity cost than another producer.

Division of Labor

The separation of tasks in production to different workers to improve efficiency.