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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
