Economics terms quiz #1

Opportunity Cost

what you give up in order to get something else

Economic Resources/ Factors of Production

land, labor, capital goods, entrepreneurial ability

Production Possibilities Curve

graphic representation of opportunity cost

Consumer Goods

goods purchased by individuals for personal use rather than for producing other goods

Capital Goods

manufactured aids used in producing goods and services

Increasing Opportunity Cost

the more of a product that is produced, the greater its opportunity cost

Constant Opportunity Cost

an economic situation where the trade-off between producing two goods remains the exact same, no matter how much of either good you produce

Scarcity

the basic economic problem of having limited resources to meet unlimited human wants and needs

Land

all gifts of nature (fish, minerals, trees, etc.), not limitless

Labor

all physical and mental talents

Capital

durable, man-made assets used as inputs to produce other goods and services or generate income

Absolute Advantage

the ability to produce more of something with a given amount of time and reasources

Comparative Advantage

the ability to produce something at a lower opportunity cost than someone else (not the same as absolute advantage)

Gains from Trade

dividing tasks (specializing) and trading benefits both parties

Law of Demand

when the price of a product increases (decreases), the quantity demanded decreases (increases)

Determinats of Demand

consumer taste, number of buyers in the market, income, price of selated goods, expectations

Change in demand

caused by change in determinats, something other than price

Change in quantity demanded

caused by a change in price

Equilibrium quantity

specific amount of a good or service that is bought and sold in a market when the quantity demanded by consumers equals the quantity supplied by producers

Price floor

government-set minimum legal price for a good, service, or resource, designed to keep prices from falling too low

Law of supply

as price rises, quantity supplied goes up

Determinants of supply

price of inputs (raw resources & labor), change in technology, taxes & subsidies

Change in supply

caused by change in determinants

Change in quantity supplied

caused by change in price

Equilibrium price

specific market price where the quantity of a good demanded by consumers equals the quantity supplied by producers

Substitute good

a product or service that consumers can use in place of another because they serve the same basic purpose

Complimentary good

goods that are used together

Surplus

an amount that remains when a use, need, or requirement has been satisfied

Shortage

an economic and physical condition where the demand for a product, service, or resource is greater than the supply available at the current market price

Price ceiling

legal maximum price set by the government or another authority on a good or service