Studied by 1 person
Looks like no one added any tags here yet for you.
economics
study of scarcity and choice
individual choice
decisions by individuals about what to do, which necessarily involve decisions about what not to do
economy
a system for coordinating a society’s productive and consumptive activities
market economy
an economy where the decisions of individual producers and consumers largely determine what, how, and for whom to produce, with little government involvement in the decisions
resource
anything that can be used to produce something else
land
refers to all resources that come from nature (minerals, timber, and petroleum)
labor
the effort of workers
capital
refers to manufactured goods used to make other goods and services
entrepreneurship
describes the efforts of entrepreneurs in organizing resources for production, taking risks to create new enterprises, and innovating to develop new products and production processes
scarce
describes a type of resource that is not available in sufficient quantities to satisfy all the various ways a society wants to use it
opportunity cost
the real cost of an item; what you must give up in order to get it (often the second best choice)
microeconomics
the study of how people make decisions and how those decisions interact
macroeconomics
is concerned with the overall ups and downs in the economy
economics aggregates
economic measures that summarize data across many different markets
positive economics
how the economy actually works
normative economics
how the economy should work
business cycle
the short-run alternation between economic downturns, known as recessions, and economic upturns, known as expansions
depression
a very deep and prolonged downturn
recession
periods of economic downturns when output and employment are falling
expansions
aka recoveries, are periods of economic upturns when output and employment are rising
employment
number of people currently employed in the economy
unemployment
number of people who are actively looking for work but aren’t currently employed
labor force
equal to the sum of employment and unemployment
unemployment rate
percentage of the labor force that is unemployed
output
quantity of goods and services produced
aggregate output
the economy’s total production of goods and services for a given time period
inflation
a rising overall price level
deflation
a falling overall price level
price stability
occurs in the economy when the aggregate price level is changing only slowly
economic growth
an increase in the maximum amount of goods and services an economy can produce
model
a simplified representation used to better understand a real-life situation
other things equal assumption
aka ceteris paribus assumption; means that all other relevant factors remain unchanged
trade-off
occurs when you give up something in order to have something else
production possibilities curve
illustrates the trade-offs facing an economy that produces only 2 goods. it shows the maximum quantity of one good that can be produced for each possible quantity of the other good produced.
efficient
describes an economy when there is no way to make anyone better off without making another person worse off
technology
the technical means for producing goods and services
trade
occurs in a market economy; when individuals provide goods and services to others and receive goods and services in return
gains from trade
people can get more of what they want through trade (and specialization) than they could if they tried to be self-suffcient
specialization
each person specializes in the task that he or she is good at performing (lower oc)
comparative advantage
when the opportunity cost for producing a certain good or service is lower for you than for others
absolute advantage
if you can make more of a good or service with a given amount of time and resources, does not take into account opportunity cost
competitive market
a market in which there are many buyers and sellers of the same (aka one) good or service, none of whom can influence the price at which the good or service is sold
supply and demand model
a model of how a competitive market works
demand schedule
shows how much of a good or service consumers will be willing and able to buy at different prices
quantity demanded
the actual amount of a good or service consumers are willing and able to buy at some specific price
demand curve
a graphical representation of the demand schedule; it shows the relationship between QD and price
law of demand
says that a higher price for a good or service, all other things being equal, leads people to demand a smaller quantity of that good or service
change in demand
a shift of the entire demand curve, which changes the quantity demanded at any given price
movement along the demand curve
a change in the quantity demanded of a good that is caused by a change in that good’s price
substitutes
refers to 2 goods where a rise in the price of one good leads to an increase in the demand for the other good
complements
refers to 2 goods where a rise in the price of one good leads to a decrease in the demand for the other good
normal goods
the demand increases for this good when there is a rise in income
inferior goods
the demand decreases for this good when there is a rise in income
individual demand curve
illustrates the relationship between quantity demanded and price for an individual consumer
quantity supplied
the actual amount of a good or service producers are willing to sell at some specific price
supply schedule
shows how much of a good or service producers will supply at different prices
supply curve
shows the relationship between QS and price
law of supply
says that, other things being equal, the price and quantity supplied of a good are positively related
change in supply
a shift of the entire supply curve, which changes the quantity supplied at any given price
movement along the supply curve
a change in the quantity supplied of a good that is caused by a change in that good’s price
input
anything that is used to produce a good or service
individual supply curve
illustrates the relationship between quantity supplied and price for an individual producer
equilibrium
when no individual would be better off doing something different
equilibrium price
aka market-clearing price; the price at which the QD = QS;
market-clearing price
aka equilibrium price; the price at which the QD = QS
equilibrium quantity
the quantity of the good bought and sold at the equilibrium price
surplus
when the QS > QD; when the price is above its equilibrium level
shortage
when the QD > QS; when the price is below its equilibrium level
price controls
legal restrictions on how high or low a market price may go; can be either a price ceiling or price floor
price ceilings
a max price sellers are allowed to charge for a good or service
price floor
a min price buyers are required to pay for a good or service
minimum wage
a legal price floor on the wage rate (market price of labor)
