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Scarcity
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A product or service that if quantity demanded is higher than quantity supplied.
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Opportunity Costs
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What you give up getting something
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Efficiency
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the property of society getting the most it can from its scarce resources
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Property rights
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the ability of an individual to own and exercise control over scarce resources
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Market Failure
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a situation in which a market left on its own fails to allocate resources efficiently
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Externality
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-the impact of one person's actions on the well-being of a bystander
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Market Power
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the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices.
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Productivity
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the quantity of goods and services produced from each unit of labor input (Output/number of workers)
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Inflation
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-an increase in the overall level of prices in the economy
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Circular Flow-model
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a visual model of the economy that shows how dollars flow through markets among households and firms.
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Microeconomics
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-the study of how households and firms make decisions and how they interact in markets
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Macroeconomics
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the study of economy-wide phenomena, including inflation, unemployment, and economic growth
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Business Cycle
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fluctuations in economic activity, such as employment and production
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Law of Demand
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the claim that, other things being equal, the quantity demanded of a good fall when the price of the good rises.
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Law of Supply
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the claim that, other things being equal, the quantity supplied of a good rise when the price of the good rises.
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Laws of Supply and Demand
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-the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance
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Shortage
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a situation in which quantity demanded is greater than quantity supplied
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Surplus
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a situation in which quantity supplied is greater than quantity demanded
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Competitive Market
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a market in which there are many buyers and many sellers so that each has a negligible impact on the market price
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Gross Domestic Product(GDP)
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the market value of all final goods and services produced within a country in a given period of time
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Consumption
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spending by households on goods and services, with the exception of purchases of new housing
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Investment
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-spending on business capital, residential capital, and inventories
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Government purchases
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spending on goods and services by local, state, and federal governments
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Net exports
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spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents (imports)
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Nominal GDP
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the production of goods and services valued at current prices
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Real GDP
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the production of goods and services valued at constant prices
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GDP Deflator
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a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100
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Imputation
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-a charge or claim that someone has done something undesirable; an accusation
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Consumer price index(CPI)
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a measure of the overall cost of the goods and services bought by a typical consumer
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Core CPI
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a measure of the overall cost of consumer goods and services excluding food and energy
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Indexation
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-the automatic correction by law or contract of a dollar amount for the effects of inflation
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Nominal interest Rate
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the interest rate as usually reported without a correction for the effects of inflation
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Real interest rate
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-the interest rate corrected for the effects of inflation
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Ex ante real interest rate
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is the real interest rate that is calculated before the actual rate of inflation is known.
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Ex post real interest rate
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the actual real interest rate after inflation is known
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Physical Capital
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the stock of equipment and structures that are used to produce goods and services
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Human Capital
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-the knowledge and skills that workers acquire through education and on-the-job training
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Knowledge
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An input into production
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Nonrivalry
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-consumption of a good by one person does not reduce the amount available for others.
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Diminishing Returns
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-the property whereby the benefit from an extra unit of an input declines as the quantity of the input increases
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Social Capital
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the networks of relationships among people who live and work in a particular society, enabling that society to function effectively.
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Production Function
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gives the technological relation between quantities of physical inputs and quantities of output of goods.
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