Studied by 308 people
Economy
A system that coordinates choices about production with choices about consumption and distributes goods and services to the people who want them
Market economy
In which production and consumption are the result of decentralized decisions by many firms and individuals
Command economy
In which industry is publicly owned and there is a central authority making production and consumption decisions
Mixed Economy
An economic system combining private and public enterprise; capital is publicly owned, government oversees the economy
Capitalism
An economic system based on private ownership of capital; markets and prices determine the economy
Incentives
Rewards or punishments that motivate particular choices
Surplus
The amount of a product or service beyond what is required, above equilibrium prices
Property rights
Establish ownership and grant individuals the right to trade goods and services with each other, create many of the incentives in market economies
Marginal analysis
Analysis that involves comparing the marginal benefits and marginal costs
Resource
Anything (land, labor, capital, entrepreneurship) that can be used to produce something else; aka economic resources
Land resource
Resources found on the Earth (i.e. water, timber, minerals, etc.)
Labor resource
The time and effort of workers in the production process
Capital resource
Manufactured goods used to make other goods and services (i.e. machinery, buildings, tools, etc.)
Entrepreneurship resource
Risk taking, innovation, and the organization of resources for production
Resource scarcity
When there is not a great enough quantity of a resource to satisfy the various ways a society wants to use it; or for a limited supply of a resource, there is unlimited demand
Opportunity cost
The value of the next best alternative that you must give up when you make a particular choice
Microeconomics
Choices made by individuals, household, or firms - the small parts that make up the economy as a whole
Macroeconomics
The overall ups and downs of the economy, the explanations behind those fluctuations and how economic policy minimizes damage they cause
Economic aggregates
Economic measures such as the unemployment rate, the inflation rate, and gross domestic product, summarize data across many different markets
Positive economics
The branch of economic analysis that describes the way the economy actually works, "right" or "wrong" answer question
Normative economics
The part of economics involving value judgments about what the economy should be like; focused on which economic goals and policies should be implemented; policy economics
Reasons why economists disagree
Different core values held by economists 2. Different ways economic analysis is conducted (leading to different conclusions)
Market Equilibrium
A situation where no one would be better off doing something different; or the supply is equal to the demand
Business cycle
The alternation between economic downturns and upturns in the macroeconomy
Recession
Occasional economic downturns in the business cycle, output and employment fall
Expansions
AKA recoveries, periods in which output and employment are rising, economic upturns in the business cycle
Depression
A very deep and prolonged economic downturn
Employment
Total number of people who are currently working for pay; employment rates are ideally at 95% (full employment)
Unemployment
Total number of people who aren't currently employed but are actively seeking out a job; ideally unemployment rates are at 5%
Unemployment Rate
The percentage of the labor force (sum of unemployed and employed individuals) that are unemployed
Output
The quantity of goods and services produced
Aggregate Output
The economy's total production of goods, services within a time period (usually 1 year)
Inflation
Rise in general level of prices
Deflation
Fall in overall price level
Economic Growth
An increase in the maximum possible output of an economy (working at max efficiency)
Economic Models
Simplified version of reality used to better understand real-life situations in economics, not an actual economy, can be a graph, equation, simulation
Other Things Equal Assumption
Aka ceteris paribus, the assumption that factors other than those being considered do not change
Trade-off
When you give something up in order to obtain something else
Production Possibilities Curve (PPC)
A graph used by economists to understand trade-offs in a simplified economy that produces two goods, shows the combinations of two goods and services; maximum quantities of each good for every quantity produced of the other
Efficient
Best possible economy with no missed opportunities or making people worse off for others to be better, using all resources
Productive efficiency
When an economy is producing at a point on its PPC, using all economic resources
Allocative efficiency
When an economy allocates its resources so that consumers are as well off as possible
Trade
When people divide tasks among themselves and each person provides a good or service that other people want in return for different goods and services that he or she wants; getting what you want in exchange for what you produce best
Benefits of Trade
By dividing the tasks and trading with each other, two people can get more of they want than they could get by depending only on themselves
Specialization
When each person engages in a task that he or she is particularly good at performing
Comparative Advantage
Producing something if the opportunity cost of that production is lower for that individual than for other people (you lose less than others)
Terms of Trade
The rate at which one good can be exchanged for another
Absolute Advantage
When a person produces a good or service and can make more of it with a given amount of time and resources (you're more efficient than others)
Market
A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade
Demand
How much consumers are willing to buy of something
Determinants of Demand
Factors other than price that motivate a consumer to purchase an item (individual tastes, preferences, wages, INEPT)
Law of Demand
The claim that, other things being equal, the quantity demanded of a good (demand) falls when the price of the good rises
Supply
Amount of a product offered for sale at all possible prices
Law of Supply
Tendency of suppliers to offer more of a good at a higher price, less of it as prices fall
Determinants of Supply
Factors other than supply that determine the quantities supplied (i.e. prices of resources and input, technology, tariffs or sanctions, PWIGNET)
Movement Along the Demand Curve
The change in quantity demanded at a given price, affected by a change in the price (think up, down the demand curve, different from a shift of the curve)
Shift of the Demand Curve
A change in the prices consumers are willing to pay (different from change in quantity demanded) affected by changes in income, preferences, consumer numbers, etc.
Movement Along the Supply Curve
A change in the quantity producers are willing to sell, affected by a change
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