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What mechanism is used to ration resources in a free market society?
Price
What is the law of demand?
The inverse relationship between the price of a good and the quantity consumers are willing to purchase.
How does competition affect economic progress?
Competition among firms leads to better, less expensive goods and services.
What is economizing?
Gaining a specific benefit at the least possible cost.
What is the definition of opportunity cost?
The highest valued alternative that must be given up when making a choice.
What does property rights include?
The right to exclusive use, legal protection against invaders, and the right to transfer to another person.
What is producer surplus?
The difference between what producers are willing to accept for a good versus what they actually receive.
What are transaction costs?
The time, effort, and other resources needed to search out, negotiate, and conclude an exchange.
What is the economic concept of elasticity?
The responsiveness of quantity demanded or supplied to changes in price.
What is the law of comparative advantage?
Joint output of trading partners will be greatest when each good is produced by the low opportunity cost producer.
What does consumer surplus represent?
The difference between the amount consumers are willing to pay and the amount they actually pay.
Define positive economics.
The scientific study of 'what is' among economic relationships.
Define normative economics.
Judgments about 'what ought to be' in economic matters; reflects subjective values.
What does the term scarcity refer to in economics?
The limited availability of resources in relation to the unlimited wants of individuals.
What is the significance of the production possibilities curve?
It illustrates the maximum output levels for two goods given a set of resources.
