Economics Exam Preparation - ECON 251

These flashcards cover key terms and concepts in economics, specifically tailored for ECON 251 exam preparation.

Total Utility

The overall satisfaction or benefit gained from consuming a certain quantity of goods.

Marginal Utility

The additional satisfaction or benefit obtained from consuming one more unit of a good.

Marginal Utility per Dollar

The additional utility gained for each dollar spent on a good, calculated as marginal utility divided by the price of the good.

Budget Constraint

The limitation on the consumption choices of an individual, given their income and the prices of goods.

Comparative Advantage

The ability of an individual or group to carry out a particular economic activity more efficiently than another activity.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay.

Producer Surplus

The difference between what producers are willing to accept for a good or service and what they actually receive.

Diminishing Marginal Utility

The principle that as an individual consumes more units of a good, the additional satisfaction from each additional unit decreases.

Coase Theorem

The idea that private parties can solve the problem of externalities through bargaining, provided property rights are well defined.

Externality

A consequence of an economic activity that affects other parties not directly involved in the transaction.

Public Good

A good that is both nonexcludable and nonrival, meaning that individuals cannot be effectively excluded from use and use by one individual does not reduce availability for others.

Income Effect

The change in consumption resulting from a change in real income.

Substitution Effect

The change in consumption that results from a change in the price of a good, causing consumers to substitute it for other goods.

Tragedy of the Commons

A situation in which individuals acting in their own self-interest overuse a shared resource, leading to its depletion.

Normative Analysis

Analysis based on opinions or value judgments about what ought to be.

Positive Analysis

Analysis that describes and explains economic behavior without incorporating value judgments.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.

Cap-and-Trade Policy

A market-based approach to controlling pollution by providing economic incentives for achieving reductions in the emissions of pollutants.

Import Quota

A government-imposed trade restriction that limits the number of goods that can be imported into a country.