Economics first chapter flashcards

From chapter 1

what is market equilibruim

occurs where quantity demanded equals quantity supplied, resulting in an equilibrium price and quantity

demand

the quantity of a good or service that consumers are willing to buy at various prices over a given period of time, ceteris paribus

quantity demanded

the amount of a good consumers are willing and able to pay for at specific prices, ceteris paribus

production possibilities curve/frontier

A PPC/F shows the maximum possible combination of two goods that can be produced using given resources and technology

price ceiling

a maximum legal price set below equilibrium causing a shortage if binding

what is scarcity

the basic economic problem that arises because resources are limited while human wants are unlimited, forcing individuals and society to make choices

price floor

a minimum legal price set above equilibrium causing a surplus if binding

Opportunity cost

the value of the next best alternative forgone when a choice is made

Binding and non binding

Binding = Effective
Non - binding = no effect