Macro economics Chadwick exam one key terms and concepts

economics

how individuals and societies allocate their limited resources to their unlimited wants .

scarcity

limited resources and unlimited wants

microeconomics

the economics of an individual

macroeconomics

the economics of a society

indirect incentive

secondary change in behavior brought on by the original incentive

opportunity cost

the highest valued alternative

marginal thinking

evaluating if the benefit of one more unit is greater than the cost

comparative advantage

having a lower opportunity cost than the competitor

positive statement

can be tested and proven

normative statement

opinion statement

ceteris paribus

other things being equal

endogeneous factor

can be controlled

exogeneous factors

cannot be controlled

PPF

possible production outputs of a society using resources effectively

law of increasing opportunity cost

opportunity cost rises as a society produces more

absolute advantage

one producer’s ability to make more than another producer with the same resources

consumer good

current consumption

capital good

helps produce consumer goods. (factories)

shortage

QD>QS

surplus

QS>QD

competitive market

many producers selling similar products

imperfect market

buyers/ sellers can influence price

law of demand

all else equal ther is an inverse relationship between price and quantity demanded

change in quantity demanded

new point on originial curve

change in demand

change in entire curve

law of supply

all else equal there is a direct relationship between price and quantity supplied

change in supply

new point on the original supply curve

change in supply

the whole supply curve shifts

law of supply and demand

market price of any good will adjust to bring the quantity supplied and quantity demanded into balance

equilibrium price

quantity supplied is equal to quantity demanded

shortage price

price below equilibrium

surplus price

price above equilibrium

perfectly inelastic

vertical line

perfectly elastic

horizontal line

dead weight loss

decrease in activity caused by market distortions

binding price floor/ceiling

will affect equilibrium

nonbinding price floor/ceiling

will not affect equilibrium but is still in place