Introduction to Economics

These flashcards cover key terms and concepts discussed in the lecture on economics, including definitions and explanations relevant to managerial economics.

Economics

The study of how individuals and societies use limited (scarce) resources to satisfy unlimited wants.

Scarcity

The state of not having enough resources to produce all the goods and services people want.

Managerial Economics

A branch of economics that applies economic ideas to business and management decision-making.

Marginal Analysis

Comparing extra benefits and extra costs before making a decision.

Theory of Consumer Demand

Understanding how customers decide what to buy.

Opportunity Cost

The value of the next best alternative that is given up when making a choice.

Production Possibilities Curve (PPC)

A graph that shows the maximum combinations of two goods that can be produced using all available resources efficiently.

Productive Efficiency

When an economy or business produces goods at the lowest possible cost using all its resources efficiently.

Economic Growth

An outward shift of the PPC indicating that the economy can produce more of both goods.

Positive Economics

Describes what is; factual and testable.

Normative Economics

Describes what should be; based on opinion and value judgment.

Nominal Values

Prices measured today, not adjusted for inflation.

Real Values

Values adjusted for inflation, showing true purchasing power.

Microeconomics

Focuses on individual consumers, firms, and industries.

Macroeconomics

Focuses on the whole economy at the country level.

Market Economy

An economic system where decisions are made by individuals based on supply and demand.

Command Economy

An economic system where the government makes all economic decisions.

Mixed Economy

An economic system that combines both market and command elements.

Price Ceiling

A maximum legal price set below equilibrium intended to protect consumers.

Price Floor

A minimum legal price set above equilibrium intended to protect producers.

Law of Demand

When price rises, quantity demanded falls; when price falls, quantity demanded rises.

Determinants of Supply

Factors that shift the supply curve left or right, such as resource prices and technology.

Elasticity

How responsive quantity demanded or supplied is to changes in price or income.

Price Elasticity of Demand (PED)

Measures how much quantity demanded changes when price changes.

Income Elasticity of Demand (YED)

Measures how quantity demanded changes when income changes.

Gross Domestic Product (GDP)

The total value of all final goods and services produced within a country's borders during a specific period.

Nominal GDP

The value of produced goods and services at current market prices.

Real GDP

The value of produced goods and services adjusted for inflation.

GDP Deflator

Measures how much prices have changed (inflation) between years.