Econ Mid Term Assessment

buyers market

A market situation where supply exceeds demand giving buyers an advantage and leading to lower prices

Sellers market

A market situation where demand exceed supply giving sellers an advantage and leading to higher prices

Division of labor

The specialization of labor that leads to greater efficiency by allowing groups trained by specific tasks to work together efficiently

Scarcity

A condition where resources are limited and unable to meet unlimited human desires

Shortage

A temporary condition where demand exceeds supply often restocked overtime

Perfect competition

A market structure with many buyers and sellers, identical, products, free entry, and exit, and the pressure control

Monopolistic competition

A market structure with many buyers and sellers, different products, some price control, and low barriers to entry

Oligopoly

A market structure characterized by a few large firms, whose actions are Independent (branding/loyaltites) with High barriers to entry (large start up price, patents), and firms are able to collaborate to set prices or output level, which reduces competition

Monopoly

A market structure dominated by one firm the offers, a unique product or service with no substitutions, Has large power over Setting prices and control the supply of good or service, Mostly ineffective as it can lead to higher prices and less innovation due to lack of competition

Natural monopoly

A market that is most efficient with only one large firm that provides all of the outputs. such as public utilities, like water (competition gets out of hand ——> leads to government involvement)

Income effect

The changes conception, resulting from a CHANGE in the price of goods, not due to the change in income

Change in income

Signifies a change in hours worked/salary, as in this income changes while price does not

Elastic demand

when a small change in price results in a large change in quantity demanded

Inelastic demand

When a large change in price results in only a small change in quantity demanded

Elastic supply

Producers can easily increase production when prices rise

Inelastic supply

Producers can’t easily increase production when price rises

Law of Demand

States that there is an inverse relationship between price and quantity demanded: As price increases, demand decreases

Market schedule

A table showing the quantity of a good that consumers are willing to buy at a various price level for a given amount of time

Market curve

A graph representing the relationship between price and quantity supplied or demanded

Subsidies

Financial assistance provided by the government to encourage the production or consumption of a specific good

Rationing

A system that limits the amount of good people can buy during times of scarcity

Price-based system

A mechanism where goods are allocated based on market prices determined by supply or demand

Price ceiling

A maximum limit set by the government on how much can be charged for a product, leading to shortages (ex- rent control)

Price flooring

A minimum price set by the government that can be charged for a product, leading to surpluses (ex- minimum wage)

production possibilities frontier

A curve that shows the maximum output possibilities for two goods given a set of inputs

invisible hand

A concept by Adam Smith, suggesting that individuals self interest in a free market leads to economic well-being for all (supply and demand are forces that regulate the market)

Trade-off

The decision where choosing one option results and giving up another

Guns and butter concept

A common metaphor Used by economists to illustrate trade-off between military spending (guns) and consumer goods (butter). Representing that society has limited resources

How is the production possibility curve/frontier related to trade-offs

Demonstrates the maximum contribution of two goods or service that can be produced with a fixed amount of resources.

Trade-off occurs because producing More of one good means producing less than the other

Marginal product of labor

as it increases, firms are more willing to produce and supply more goods because the additional labor leads to higher output and profitability (shift right, increase supply)

Diminishing marginal returns of labor

each additional worker contributes less to total output, which means the firms become less efficient leading to higher production cost (Shift left, decrease supply)

Negative marginal return

The first production becomes less efficient to the point where it is producing less output with more labor (shift left, decrease supply)

inferior good

A type of good whose demand increases when consumers income decreases

Public good

A good that cannot be easily excluded from use, where consumption by one does not reduce availability to others

Private good

good that can be excluded from use, were consumption by one person reduces availability to others

Principle is a free enterprise

economic principles include private property, rights, free exchange, competition, profit, motive, and limited amount of government involvement

Mixed economy

An economic system, combining free market principles with government regulations

Factors market

factors of production (Land, labor, capital) Are exchanged. Households provide these factors to businesses In exchange for income (Wages, rent)

Product market

A market or goods and services are exchanged between businesses and households

physical capital

man-made objects used in production of goods and services (Machinery, tools, building, equipments)

human capital

The skills and Knowledge the skills and knowledge possessed by an individual, contributing to economic productivity