Economics Key Concepts Flashcards (Ch 1-5)

Non-Price Determinants of Demand

Factors other than price that cause the entire demand curve to shift (e.g., income, tastes, prices of substitutes/complements, population, expectations).

Non-Price Determinants of Supply

Factors other than price that cause the entire supply curve to shift (e.g., input costs, technology, government taxes/subsidies, prices of related goods, number of firms).

Movement along a Demand Curve

A change in quantity demanded caused solely by a change in the product's own price.

Shift of the Demand Curve

A change in overall demand at every price point caused by a change in a non-price determinant.

Movement along a Supply Curve

A change in quantity supplied caused solely by a change in the product's own price.

Shift of the Supply Curve

A change in overall supply at every price point caused by a change in a non-price determinant.

Competitive Supply

Goods produced using the same factors of production, where increasing the production of one reduces the supply of the other (e.g., corn vs. soybeans on the same farmland).

Joint Supply

Goods produced together from a single source, where an increase in the output of one automatically increases the supply of the other (e.g., beef and leather).

Scarcity

The central economic problem where finite resources are insufficient to satisfy infinite human wants.

Opportunity Cost

The value of the next best alternative foregone when an economic decision is made.

Factors of Production

The four essential productive inputs: Land, Labor, Capital, and Entrepreneurship.

Production Possibilities Curve (PPC)

A diagram showing the maximum potential combinations of two outputs an economy can produce given full resource efficiency.

Ceteris Paribus

The Latin assumption meaning "all other variables remain constant" while examining isolated relationships.

Positive Economics

Objective economic statements that can be verified, tested, or disproven using empirical data.

Normative Economics

Value-based economic statements reflecting opinions or moral judgements that cannot be scientifically tested.

Laissez-Faire

The free-market doctrine advocating zero government intervention in economic affairs.

Classical Economics

The 18th/19th-century school of thought promoting self-regulating markets, individual self-interest, and price mechanisms.

Neoclassical Economics

The traditional framework focusing on how utility-maximizing consumers and profit-maximizing firms determine market prices.

Keynesian Economics

The macroeconomic theory arguing that aggregate demand drives output and requires active government intervention during downturns.

Circular Economy

An economic system designed to minimize waste through continuous recycling, reuse, and sustainable product life cycles.

Law of Demand

The principle stating that price and quantity demanded are inversely related, ceteris paribus.

Law of Supply

The principle stating that price and quantity supplied are directly related, ceteris paribus.

Substitute Goods

Alternative products where a price increase in one leads to an increase in demand for the other.

Complementary Goods

Paired products where a price increase in one leads to a decrease in demand for the other.

Normal Good

A product whose demand rises when consumer income increases.

Inferior Good

A product whose demand falls when consumer income increases.

Price Elasticity of Demand (PED)

The ratio measuring consumer responsiveness to a change in price along a demand curve.

Price Elastic Demand

A situation where the percentage change in quantity demanded is greater than the percentage change in price ($PED > 1$).

Price Inelastic Demand

A situation where the percentage change in quantity demanded is smaller than the percentage change in price ($PED < 1$).

Income Elasticity of Demand (YED)

A metric measuring how demand shifts when consumer purchasing power changes.

Primary Commodities

Raw agricultural products or extracted minerals that typically display price-inelastic demand and supply.

Price Elasticity of Supply (PES)

A metric quantifying producer responsiveness to price movements.

Rational Consumer Choice

The traditional neoclassical assumption that consumers make logical decisions to maximize total utility.

Cognitive Biases

Systematic deviations from rational judgment or logical decision-making.