Macroeconmics Final

Scarcity

Scarcity

The concept that human wants for goods, services, and resources exceed what is available.

Division of Labor

Separating the production of a good or service into several tasks performed by different workers.

Opportunity Cost

The cost of giving up the next best alternative when making a decision.

Microeconomics

The study of individual agents within the economy, such as households, workers, and businesses.

Macroeconomics

The study of the economy as a whole.

Market Economy

An economic system where decision-making is decentralized and based on private enterprise.

Production Possibilities Frontier (PPF)

A model that shows the maximum combination of goods and services that can be produced given available resources and technology.

Comparative Advantage

When a country can produce a good at a lower opportunity cost than another country.

Demand

The amount of a good or service consumers are willing and able to purchase at each price.

Supply

The amount of a good or service a producer is willing to supply at each price.

Equilibrium

The point where the supply and demand curves intersect, resulting in a common quantity and price.

Price Ceilings

Government-imposed maximum prices that prevent prices from rising above a certain level.

Price Floors

Government-imposed minimum prices that prevent prices from falling below a certain level.

Consumer Surplus

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

Producer Surplus

The difference between the price producers receive and the price they would have been willing to accept for a good or service.

Social Surplus

The sum of consumer surplus and producer surplus, also known as economic surplus or total surplus.

Deadweight Loss

The loss in social surplus that occurs when the economy produces at an inefficient quantity.

Labor Markets

Markets where individuals supply their labor and businesses demand labor.

Financial Markets

Markets where individuals and businesses buy and sell financial assets, such as stocks and bonds.

Law of Demand

A higher salary or wage leads to a decrease in the quantity of labor demanded by employers, while a lower salary or wage leads to an increase in the quantity of labor demanded.

Equilibrium in the Labor Market

At equilibrium, the quantity supplied and the quantity demanded are equal.

Shifts in Labor Demand

The demand for certain occupations, such as chefs, pharmacists, and attorneys, is dependent on the demand for related goods or services.

Shifts in Labor Supply

Changes in technology and wage inequality can affect the supply of labor in the market.

Price Floors in the Labor Market

Minimum wage laws set a price floor, making it illegal for employers to pay employees less than a certain hourly rate.

Demand and Supply in Financial Markets

Financial markets connect those who wish to supply financial capital with those who demand financial capital.

Elasticity

Elasticity measures the responsiveness of one variable to changes in another variable.

Price Elasticity of Demand and Price Elasticity of Supply

Price elasticity measures the responsiveness of quantity demanded or supplied to changes in price.

Calculating Price Elasticity of Demand

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price.

Elasticity and Pricing

Elasticity affects pricing decisions and the ability to pass costs on to consumers.

Income Elasticity of Demand

Income elasticity measures the responsiveness of quantity demanded to changes in income.

Cross-Price Elasticity of Demand

Cross-price elasticity measures the responsiveness of quantity demanded to changes in the price of related goods.

Elasticity in Labor and Financial Capital Markets

Elasticity of labor supply and savings supply describe the responsiveness of quantity supplied to changes in wages and interest rates, respectively.

Circular Flow Diagram

The circular flow diagram illustrates the interaction between households and firms in the goods and services market and the labor market.

Opportunity Cost

Opportunity cost is the value of the next best alternative that must be given up when making a choice.

Microeconomics

Microeconomics focuses on the actions of individual agents within the economy, such as households, workers, and businesses.

Macroeconomics

Macroeconomics looks at the economy as a whole and focuses on broad issues such as economic growth, unemployment, inflation, and government policies.

Monetary Policy

Monetary policy involves policies that affect bank lending, interest rates, and financial capital markets, and is conducted by a nation's central bank.

Fiscal Policy

Fiscal policy involves government spending and taxation decisions and is determined by a nation's legislative body.

Aggregate Demand

Aggregate demand represents the total demand for goods and services in an economy and is calculated as the sum of consumption, investment, government spending, and net exports.