Midterm Exam 1 Prep

CPED complement

negetive

CPED substitute

positive

PED

-1 = unit elastic

less than -1 = elastic

greater than -1 = inelastic 

always negitive

IED normal

positive

luxury = greater than 1

necessity = 0-1

IED inferior

negative (IED)

PES

demand shifters

income of buyers

number of buyers

expectations of buyers

prices of related goods

tastes

supply shifters

number of sellers

input prices

technology

expectations about future prices 

surplus

a situation in which quantity supplied is greater than quantity demanded

shortage

a situation in which quantity demanded is greater than quantity supplied

law of supply and demand

the claim that the price of any good adjusts to bring the quantity supplied ad the quantity demanded of that good into balance 

law of supply

the claim that, other things being equal, the quantity supplied of a good rise when the price of the good rises

law of demand

the claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises

shifting along a supply or demand curve

change in the quantity supplied or demanded

shifiting the supply or demand curve

change in supply or demand

absolute advantage

the ability to produce a good using fwer inputs than another producer

opportunity cost

whatever must be given up to obtain some item

mesures the trade-off between two goods that each producers faces

comparative advantage

the ability to produce a good at a lower opportunity cost than another producer.

reflects the opportunity cost

the gains from specilaization and trade are based on …

positive statement

claims that attempt to describe the world as it is

fact

normative statements

claims that attempt to prescribe how the world should be

opinion

efficiency

the property of society getting the most it can from its scarce resources

marginal change

a small incremental adjustment to a plan or policy

marginal cost

the extra cost that you would incur by producing one more unit of a good or service.

market economcy

an economy that allocates resources through the dectrnaliationed decision of many firms and households as they interact in markets for goods and services

externality

the impact of one person’s actions on the well-being of a bystander

inflation

an increase in the overall level of prices in the economy

productivity

the quantity of goods and services produced from each unit of labor input