honors econ midterm vocab

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resources

anything that is used to produce goods or services

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scarcity

the condition in which our wants are greater than the resources available to satisfy them.

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opportunity cost

the most highly valued opportunity or alternative forfeited when a choice is made

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production possibilities frontier (PPF)

a graphic representation of all possible combinations of two goods that an economy can produce

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marginal (in economics)

additional

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incentive

something that encourages or motivates a person to take action

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tangible

able to be felt by touch

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goods

anything that satisfies a person's wants or brings satisfaction (tangible products)

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utility

the quality of bringing satisfaction or happiness

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services

tasks that people pay others to perform for them

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land

all the natural resources found in nature

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labor

the physical and mental talents that people contribute to the production of goods and services

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capital

produced goods that can be used as resources for further production

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economic system

the way in which a society decides what goods to produce, how to produce them, and for whom goods will be produced

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free enterprise

an economic system in which individuals (not government) own most, if not all, the resources and control their use. Government plays only a small part in the economy

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socialism

an economic system in which the government controls and may own many of the resources

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traditional economy

an economic system in which the answers to the three economic questions are based on customs, traditions, and cultural beliefs

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globalization

a phenomenon in which economic agents in any given part of the world are affected by events elsewhere in the world; the growing integration of the national economies of the world to the degree that we may be witnessing the emergence and operation of a single worldwide economy

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offshoring

the term used to describe work done for a company by persons other than the original company's employees in a country other than the one in which the company is located

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private property

any good that is owned by an individual or business

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public property

any good that is owned by the government

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circular flow of economic activity

the economic relationship between different economic groups (businesses, the government, and households) in an economy

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ethics

the principles of conduct such as right and wrong, morality and immorality, good and bad

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entrepreneur

a person who has a special talent for searching out and taking advantage of new business opportunities

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contract

an agreement between two or more people to do something

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private good

a good of which one person's consumption takes away from another person's consumption

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excludable public good

a public good that individuals can be prohibited from consuming

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nonexcludable public good

a public good that individuals cannot be prohibited from consuming

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free rider

a person who receives the benefits of a good without paying for it

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market

any place where goods are bought and sold

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demand

the willingness and ability of buyers to purchase different quantities of a good at different prices during specific time periods

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law of demand

a law stating that as price increases, the quantity demanded decreases, and as price decreases, quantity demanded increases

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quantity demanded

the number of units purchased at a specific price

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demand schedule

the numerical representation of the law of demand

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normal good

when income rises, demand rises, and vice versa

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inferior good

when income rises, demand falls, and vice versa

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substitute

a similar good; with substitutes, the price of one and the demand for the other move in the same direction

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complement

a good that is consumed with another good; with complements, the price of one and the demand of the other move in opposite directions

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elasticity of demand

the relationship between the percentage change in quantity demanded and the percentage change in price

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elastic demand

the type of demand that exists when the % change in Qd is greater than the % change in price

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inelastic demand

the type of demand that exists when the % change in Qd is less than the % change in price

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unit-elastic demand

the type of demand that exists when the % change in Qd is the same as the % change in price

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supply

the willingness and ability of sellers to produce and offer to sell different quantities of a good at different prices during a specific time period.

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law of supply

a law stating that as the price of a good increases, the quantity supplied of the good increases, and as the price of a good decreases, the quantity supplied of the good decreases.

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direct relationship

a relationship between two factors in which the factors move in the same direction

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quantity supplied

the number of units of a good produced and offered for sale at a specific price

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supply schedule

a numerical chart illustrating the law of supply

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supply curve

a graph that shows the amount of a good sellers are willing and able to sell at various prices

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technology

the body of skills and knowledge concerning the use of resources in production

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subsidy

a financial payment made by the government for certain actions

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quota

a legal limit on the number of units of a foreign-produce good (import) that can enter a country.

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rationing device

a means for deciding who gets what portion of the available goods and resources

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capitalism

an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state

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command economy

an economy in which production, investment, prices, and incomes are determined centrally by a government.

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Adam Smith

believed that self-interest causes people to work hard and take risks, which benefit society.

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Karl Marx

believed all value in produced goods comes from labor, and that capitalists exploit laborers

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Total revenue

price of a good x number of units sold

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loss

the amount of money by which total cost exceeds total revenue

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negative externality

the harm, cost, or inconvenience suffered by a third party because of actions by others

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per-unit cost

the average cost of a good

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surplus

the condition in which the quantity supplied of a good is greater than the quantity demanded of a good (only occur above equilibrium price)

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shortage

the condition in which the quantity demanded of a good is greater than the quantity supplied (only occur below equilibrium price)

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equilibrium

in a market, the point at which the quantity of a good that buyers are willing and able to buy is equal to the quantity that sellers are willing and able to produce and offer for sale

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price floor

A legal minimum on the price at which a good can be sold

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price ceiling

a legislated price (set lower than the equilibrium price) above which buyers and sellers cannot legally buy and sell a good

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Sole Proprietorship

a business that is owned by one individual who makes all business decisions, receives all the profits or incurs all the losses of the firm, and is legally responsible for the debts of the firm.

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partnership

a business owned by two or more co-owners, called partners, who share profits and are legally responsible for debts

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corporation

a legal entity that can conduct business in its own name in the same way that an individual does

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franchisee

the person or group who buys a franchise.

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profit

the amount of money left over after all the costs of production have been paid; exists when total revenue is greater than total cost.

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fixed cost

a cost, or expense, that is the same no matter how many units of a good are produced

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marginal cost

the cost of producing an additional unit of a good; the change in total cost that results from producing one additional unit of output

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marginal revenue

the revenue from selling an additional unit of a good; the change in total revenue that results from selling an additional unit of output

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average total cost

the total cost divided by the quantity of the output

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total cost

the sum of fixed costs plus variable costs

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diminishing marginal returns

if additional units of one resource are added to another resource in fixed supply, eventually the additional output will decrease.

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variable cost

a cost, or expense, that changes with the number of units of a good produced

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unlimited liability

a condition in which the sole proprietor is responsible for all the losses of the firm.

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market structures

the setting in which a seller finds itself. they are defined by their characteristics.

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perfectly competitive

a market structure characterized by (1) many buyers and sellers, (2) all firms selling identical goods, (3) all relevant information about buying and selling activities available to buyers and sellers, and (4) easy entry into and out of the market

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natural monopoly

a firm with such a low average total cost that only it can survive in the market.

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public franchise

a right granted to a firm by the government that permits the firm to provide a particular good or service and excludes all others from doing so.

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price discrimination

the practice by which a seller charges different prices (to different buyers) for the product it sells when the price differences do not reflect cost differences

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oligopolistic market

a market structure characterized by (1) few sellers, (2) the production and sale of identical or slightly differentiated products, and (3) significant barriers for entry.

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