Economics 1014 Key Vocabulary

Vocabulary flashcards covering key micro and macro economic concepts from Economics 1014 lectures.

Incentives

Factors that influence human behavior, to which people respond in predictable ways.

Invisible hand

The concept where good institutions align self-interest with social interest, causing individuals working for their own interest to produce outcomes good for society.

Opportunity cost

The choice of one thing over another; what must be given up to obtain something else.

Positive economics

Economic analysis that focuses on describing, explaining, or predicting economic events.

Normative economics

Economic analysis involving recommendations or arguments about what public policy should or should not be, which is non-testable with facts.

Absolute advantage

The ability to produce a good using fewer inputs or exhibiting higher productivity across goods than another producer.

Comparative advantage

The ability to produce a good at a lower opportunity cost than another producer, playing a critical role in determining patterns of international trade.

Quantity demanded

The amount of a good that consumers are willing to buy at any given time, reflecting the preferences of all consumers in the market.

Consumer surplus

For an individual, the difference between willingness to pay for a given unit of a good and the price actually paid in the market.

Substitutes

Goods that can be replaced by one another, where an increase in the price of one leads to an increase in quantity demanded for the other.

Complements

Goods that go together in the mind of the consumer, such that an increase in the price of one decreases demand for the other.

Quantity supplied

The amount of a good that sellers are willing to produce and bring to market at any given price.

Elasticity of demand

A measure defined as $\frac{\text{\% change in quantity demanded}}{\text{\% change in price}}$, which is always negative.

Elastic demand

Demand where the magnitude of the price elasticity of demand is greater than $1$ ($>1$).

Inelastic demand

Demand where the magnitude of the price elasticity of demand is less than $1$ ($<1$).

Unit elastic demand

Demand where the magnitude of the price elasticity of demand is equal to $1$ ($=1$).

Elasticity of supply

A positive measure defined as $\frac{\text{\% change in quantity supplied}}{\text{\% change in price}}$.