Economics Exam Review: Markets, Efficiency, and Supply & Demand

Vocabulary flashcards covering fundamental economic terms, market structures, efficiency types, price controls, and shift conditions from the lecture content.

Resource Market

A market where the four economic resources (land, labor, capital, and entrepreneurial ability) are exchanged, with households acting as suppliers and businesses as demanders.

Four Economic Resources

The essential inputs used in production, consisting of land, labor, capital, and entrepreneurial ability.

Product Market

A market where goods and services are exchanged, with businesses supplying the products and households demanding them.

Economic Growth

An increase in an economy's ability to produce more goods and services than before, graphically represented by shifting the production possibilities curve to the right.

Productive Efficiency

The condition in which goods and services are produced in the least costly way without wasting resources, time, or money.

Allocative Efficiency

The condition in which resources are used to produce the specific goods and services most wanted by society, occurring graphically at the point of market equilibrium.

Capital Good

A product or machine used in the production of consumer goods and services rather than consumed for immediate satisfaction.

Consumer Good

A final product directly purchased and used by households to satisfy current wants and needs.

Four Factor Payments

The payments received by households for providing economic resources, consisting of wage, rent, interest, and profit.

Price Control

A legal restriction established by government that prevents a market price from reaching equilibrium.

Price Floor

A price control set above the equilibrium price that prevents prices from falling below a specific minimum, such as the minimum wage.

Price Ceiling

A price control set below the equilibrium price that establishes a legal maximum price that can be charged.

Opportunity Cost

The value of the next best alternative given up when making a choice, measured graphically by the slope of the production possibilities curve.

Law of Increasing Opportunity Cost

The economic concept that as you produce more units of a product, the opportunity cost to produce each additional unit increases, causing the slope of the production possibilities curve to become steeper and more negative.

Surplus

A situation in which the quantity supplied exceeds the quantity demanded, occurring at prices set above the equilibrium price.

Shortage

A situation in which the quantity demanded exceeds the quantity supplied, occurring at prices set below the equilibrium price.

Positive Economic Statement

An objective statement based on factual information and data that can be tested and proven true or false.

Normative Economic Statement

A subjective statement based on value judgments or opinions regarding what ought to be, which cannot be proven true or false by facts.