Econ

Economics

study of human choice to search to satisfy wants and needs

Fiat Money

Something that has value because declared so

True or False: All goods and services are scarce

true

What does economics try to do?

solve scarcity by delegating who gets what resources

shortage

temporary production distribution problem

Land

natural recourses

Labour

effort put into a task

Capital

human-made resources that create other goods/services

Human Capital

knowledge, skills, and abilities

Entrepreneurship

taking land, labor, and capital and combining them to make something new

Opportunity cost

what you gave up when choosing a certain choice

Guns and butter

tradeoff of government spending on national defense or domestic programs

Increasing marginal return

the addition of another component adding more productivity

Decreasing marginal return

the addition of another component adding less productivity than the last one added

Three economic questions

What goods or service should be produced, how should these goods or services be produces, who consumes the good or service

Factor payments

any payment for factors of productions

Efficiency

getting the most out of what you have

Efficiency is most often driven by…

technology

Traditional economy

Market economy

Command economy

Mixed economy

What role do households play in economic chart

what role do firms play in economic chart

Demand

desire to own and ability to pay

Law of demand

lower price = people buy more, higher price = people buy less

Substitution effect

substituting one good for another due to price increase

Income effect

reducing consumption of something without increasing consumption in another

Demand schedule

table that lists price compared to consumption

Demand curve

graph of demand schedule

Is the price for demand curve on x or y axis?

y axis

Ceteris Paribus

all other things held constant

What causes shift in demand curve?

income, population, consumer expectations, consumer tastes, advertising

Complementary goods

Substitutional goods

Supply

amount of good/ service available

Law of supply

higher price = higher quantity, lower price = lower quantity

quantity supplied

description of how much of a good or service is offered at a specific price

Supply schedule

relationship between price and quantity supplied

Market supply schedule

relationship between prices and total quantity supplied by all firms in a specific market

Elastic

change in price that results in rapid change of quantity demanded

Inelastic

change in price does not relatively affect quantity demanded

equilibrium

complete price balance between supply and demand

Price ceiling

maximum price a good or service can be sold for

Price floor

minimum price a good or service can be sold for

Surplus

excess in supply over demand

supply shock

unexpected event that changes supply of product or service

rationing

limiting of goods or services in high demand and short supply

black market

economic activity that takes place out of sight of the government

spillover costs

costs of production creates a negative secondary effect on a third party

search costs

time, energy, and money that buyers expended to make a transaction