Microeconomics Test Review

Define Total Revenue Formula

Define Total Revenue Formula

Mathematical formula used to determine if a product is elastic or inelastic (Price X Quantity = Total Revenue).

Define Economics

The study of people producing and exchanging scarce resources to get the goods and services that they want and need.

Define Scarcity

Not enough resources to satisfy everyone’s needs and wants.

Define Supply

The various quantities of a particular good or service a seller is willing and able to sell at different possible prices at a particular time.

Define Elasticity of Supply

A measurement of the impact of the price effect on the amount sellers supply to the market.

Define Price Effect on Demand

The impact that a change in the price of products has on a consumers buying power. If prices increase, buying power decreases.

Define Market Economy

Anywhere a voluntary exchange takes place; a free market.

Define Services

Work that one person performs for another for payment. A product that can not be touched.

Define Resources

The basic elements used to produce goods and services.

Define Traditional Economy

Individuals are not free to make decisions on what they want; economic roles are determined by societal elders.

Define Price Effect of Supply

The effect that prices have on quantity of a product that suppliers offer for sale.

Define Demand

The various quantities of a particular good or service consumers are willing and able to buy at different possible prices at a particular time.

Define Buying Power

As income and price change, so does the relative value of consumers resources. This is due to the income effect it the price effect.

Define Land

Unaltered gifts of nature; minerals, timber, and fresh air

Define Law of Demand

People will buy more of something at a lower price than at higher prices.

Define Complimentary Goods

Goods that are often used together; Burger and fries

Define Circular Flow

A diagram that maps the way a market economy operates.

Define Shortage

Occurs when the quantity demanded is greater than the quantity supplied.

Define Labor

Physical and mental abilities and efforts people use to create goods and services.

Define Voluntary Exchange

The action without obligation of trading resources in a market for goods or services.

Define Factors of Production

The resources necessary to produce products; Land, labor, capital, entrepreneurship.

Define Goods

Physical products that can be purchased. A product that can be touched.

Define Marginality

The additional cost or benefits of a decision.

Define Capital

Resources made and used by the people to produce and distribute goods and services.

Define Schedule

A listing of how much an item an individual is willing to purchase at each price. This data is shown graphically using a demand curve.

Define Market Equilibrium

A condition of price stability where the quantity demand equals the quantity supplied.

Define Substitutes

Two products that satisfy similar wants or needs are often traded for each other when the price of one rises over the other.

Define Excise Tax

A tax on the production or sale of a specific good or service.

Define Subsidy

A government payment that partially covers the cost of production.

Define Opportunity Cost

The value of the next best alternative, or what you give up by choosing one alternative over another.

Define Marginal Benefit

The benefit or satisfaction received from using one more unit or a good or service.

Define Demand Curve

A graph that shows how much of a good or service an individual will buy at each price. Each change in the quantity demand is shown by a new point on the demand curve. A demand curve slopes downward and to the right.

Define Surplus

Occurs when the quantity supplied is greater than the quantity demanded.

Define Economy

The organized way that a country provides for the wants and needs of its people.

Define Supply Schedule

A listing of how much of an item an individual producer is willing and able to offer for sale at each price.

Define Substitution Effect

The impact that a price increase has on a consumer’s decision to purchase an item or to substitute that item for a similar product that meets the same need or want but at a lower cost.

Define Supply Curve

A graph that shows how much of a good or service a producer will offer for sale at each price. Each change in the quantity suppled is shown by new point on a the supply curve.

Define Law of Supply

Supply will increase as the selling price increases.

Define Income Effect

The impact that a change in a consumers income has on buying power. If income increases, buying power will increase.

Define Command Economy

Economic decisions are made by government leaders and citizens are expected to respect those choices.

Define Elasticity of Demand

A measure of how responsive consumers are to price changes.

Define Equilibrium Price

The price at which the quantity demanded and the quantity suppled are equal. This is the price that clears the market.

Define Marginal Cost

The cost of using one more unit of a good or service.

Define Total Cost

The sum of fixed and variable costs.

Define Entrepreneurship

The combination of vision, skill, ingenuity, and willingness to take risk tat is needed to create and run a new business.

Define Labor Productivity

The amount of goods or services that a person can produce in a given time.

Define Regulation

A set of rules or laws designed to control business behavior. Depending on the type of regulation, the costs of production may increase or decrease.

Define Trade-Off

The alternative given up when an economic choice is made.