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Economics
The study of scarcity and choice
Trade-Off
You make a trade-off when you give up something in order to get something else
Resource of Factor Production
Anything that can be used to produce something else
Land
All resources that come from nature, such as timber, wind, and petroleum
Labor
The effort of workers
Capital
Manufactured goods used to make other goods and services
Entrepreneurship
The efforts of entrepreneurs in organizing resources for production, taking risks to create new enterprises, and innovating to develop new products and production processes
Scarcity
When unlimited wants exceed limited resources
Opportunity Cost
The value of the next best alternative that you have given up in order to get an item
Macroeconomics
Concerned with the overall ups and downs of the economy (large scale)
Household
A person or group of people that share their income
Firm
Any organization that produces goods or services for sale
PPC (Production Possibilities Curve)
Illustrates the necessary trade-offs in an economy that produces only two goods
Ceteris Paribus
'Other things equal' means that all other relevant factors remain unchanged
Efficient
There are no missed opportunities - there is no way to make some people better off without making other people worse off
Economic Growth
An increase in the maximum amount of goods and services an economy can produce
Trade
Providing goods and services to others and receiving goods and services in return
Specialization
When each person focuses on the task that they are good at performing
Comparative Advantage
Having the lowest opportunity cost among the people or countries that can produce that good or service
Absolute Advantage
Being able to produce more of a good or service with the given amount of time and resources
Terms of Trade
The rate at which one good can be exchanged for another and have both parties benefit
Quantity Demanded
The 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 showing the relationship between quantity demanded and price
Law of Demand
States that a higher price for a good or service leads to a smaller quantity demanded
Change in Demand
A shift of the demand curve changing the quantity demanded at any given price
Movement along the Demand Curve
A change in the quantity demanded of a good resulting from a change in that good's price
Substitutes
Goods that are used in place of one another; a rise in the price of one leads to an increase in demand for the other
Complements
Goods that are bought together; a rise in the price of one leads to a decrease in demand for the other
Normal Good
When a rise in consumer income increases the demand for the good
Inferior Good
When a rise in consumer income decreases the demand for the good
Quantity Supplied
The actual amount of a good or service people are willing to sell at some specific price
Supply Curve
The relationship between the quantity supplied and the price
Law of Supply
States that all other things being equal, the price and quantity supplied are positively related
Change in Supply
A shift of the supply curve indicating a change in quantity supplied at any given price
Movement along the Supply Curve
A change in the quantity supplied of a good arising from a change in the good's price
Input
A good or service used in the production of another good or service
Tax
Treated as an input cost, fees producers must pay to the federal government
Subsidy
Payments from the government to producers to assist in the production of certain goods or services
Substitutes in Production
Goods that producers can use the same inputs to make either one good or the other
Complements in Production
Goods where increased production of either creates more of the other good
Equilibrium
The point where Quantity Supplied equals Quantity Demanded
Surplus
Exists at a price above equilibrium where Quantity Supplied is greater than Quantity Demanded
Shortage
Exists at a price below equilibrium where Quantity Demanded is greater than Quantity Supplied
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