Chapter 13: Understanding The Economy | Quizlet

Economics

The social science studying how individuals, businesses, governments, and societies make choices about allocating scarce resources to satisfy unlimited wants.

Microeconomics

How individuals, households, and companies make decisions and how they interact with others in other markets.

Microeconomics Five Key Notions

Opportunity Costs, Scarcity, Trade-Offs, Time, and The Seen and the Unseen.

Opportunity Costs

Is the value missed out on when you choose between two or more options.

Scarcity

Is defined as having less than the quantity demanded.

Trade-Offs

Is the balancing of giving up one thing to get another.

Time

One of our most scarce resources.

The Seen and the Unseen

Is understanding what is easy to see and what is not easy to see.

Supply

Is the total quantity of a specific product or service.

Demand

The consumer's desire and ability to purchase a specific quantity of a good or service at a given price.

Market Clearing Price

Is the price that supply is at equal to demand.

Equilibrium

The market-clearing price will not change unless something happens to the market.

Changes in Demand

A shift of the entire demand curve, meaning consumers want to buy a different quantity of a good or service at every price.

Changes in Supply

A shift of the entire supply curve, caused by factors other than price.

Surplus

Excess supply.

Shortages

Excess demand.

Complementary Goods

When things are purchased together.

Substitute Goods

There are goods and services that are purchased instead of each other.

Inelastic Demand

Means that even with large changes in price, there will be little change in quantity demanded.

Elastic Demand

As the price increase, the quantity demanded can have large changes.

Absolute Advantage

Means that a person's productivity (i.e. time per task) is greater for all tasks compared to someone else.

Comparative Advantage

Which is the ability to produce a good at a lower opportunity cost than someone else.

Macroeconomics

Studies the economy-wide impact of phenomena.

Imports

The products that are made in other countries and sold domestically.

Exports

The products that are produced domestically and sold in other countries.

Tariffs

Which is a tax on imports to make them more expensive and the domestic industry seem more competitive by comparison.

Quota

Which limits the amount of a good that can be imported.

Subsidy

To provide financial support to make an export cheaper and better able to compete with other countries.

Pure Competition

There are a large number of buyers and sellers so that no one person or company can supply or demand.

Oligopoly

Is a marketplace in which there are few sellers, and there are barriers to entry, such as high start-up costs.

Monopoly

Which a single seller dominates the market and there are no good substitutes for the product or service.

Regulated Monopoly

This type of monopoly is created when local, state, or federal government grant exclusive rights to a single company to provide a product or service.

Business Cycle

The economy is always going through periods of expansion and contraction.

Recession

If the economy contracts for 2 quarters or more.

Gross Domestic Product (GDP)

Is an overall measure of the output of goods and services of the economy in a given period of time.

Monetary Policy

Affects the supply of money, requirements in the banking system, and interest rates.

Fiscal Policy

Is the government's influence on the economy through spending and taxation.