question
Econimics
answer
the study of the choices that individuals make given the presence of scarsity
question
Scarcity
answer
limited resources but unlimited wants
question
Poverty vs. scarcity
answer
not having everything you need vs. unlimited wants with limited resources
question
Commodities
answer
economic goods and services; anything you buy or sell
question
Economy
answer
the institutional structure through which individuals in a society coordinate their diverse wants
question
Three big questions
answer
what and how much to produce? how to produce it? for whom to produce it?
question
Allocation
answer
who gets what
question
Economic reasoning
answer
making decisions on the basis of costs and benefits
question
Economizing
answer
getting the maximum benefit at the minimum cost
question
The economic decision rule
answer
If the marginal benefit of an action exceeds the marginal cost, do it. If the marginal costs of an action exceed the marginal benefits, don't do it.
question
Opportunity cost
answer
the highest valued benefit that must be sacrificed as the result of choosing an alternative
question
When price falls
answer
too much of the good
question
When price increases
answer
not enough of the good
question
Invisible hand
answer
the price mechanism of the market (Adam Smith)
question
Economic theory
answer
generalizations about the working of an abstract economy
question
Positive statement
answer
a statement that can be tested, proven or disproven
question
Normative statement
answer
a statement of opinion, cannot be proven or disproven
question
Roll of pure command government
answer
government with full control
question
Roll of pure market government
answer
government with no intervention; laissez-faire
question
Property rights of pure command government
answer
government with shared resources/property
question
Property rights of pure market government
answer
government with private resource/property
question
Coordination of pure command economic activity
answer
government actions determined by central planner
question
Coordination of pure market economic activity
answer
government actions determined by market and price mechanism
question
Pure command production (what)
answer
production of what government wants
question
Pure market production (what)
answer
production of what people are willing to buy
question
Pure command production (how)
answer
how production is done determined by government or central planning body
question
Pure market production (how)
answer
how production is done by economizing, efficiency, and profit-maximizing
question
Pure command production (who)
answer
production output for people based on equal distribution
question
Pure market production (who)
answer
production output for people based on ability, effort, and inheritance
question
Markets
answer
where buyers and sellers come together for exchange
question
Quantity demanded
answer
the amount of a good that households want to consume given their income and prices in a given time period
question
The demand curve
answer
when price goes up, demand goes down; when price goes down, demand goes up
question
Law of demand
answer
as the price of a good increases, the quantity demanded falls, ceteris paribus
question
Ceteris paribus
answer
holding all else constant
question
Law of diminishing marginal benefit
answer
as more units of a good are consumed, additional units provide less benefit
question
Supply
answer
thinking like the producer
question
Quantity supplied
answer
the amount of a commodity that a firm plans to sell in a given time period at a given price
question
The law of supply
answer
as the price for which a good can be sold increases, the quantity of that good is supplied will increase (ceteris paribus)
question
The supply curve
answer
when price increases, quantity increases; when price decreases, quantity decreases
question
The law of increasing costs
answer
to supply additional units of a good, producers have greater opportunity costs, so the price must rise to induce producers to supply greater quantities
question
market equilibrium
answer
the point of intersection of demand and supply curves of a given commodity
question
Disequilibrium
answer
if price is too high, there is a surplus. Lower the price to return to equilibrium; if price is too low, there is a shortage. Raise the price to return to equilibrium
question
Excess supply (surplus)
answer
at any price, quantity supplies is greater than quantity demanded
question
Excess demand (shortage)
answer
at any price, quantity demanded is greater than quantity supplied
question
Changes in quantity demanded
answer
movement along the demand curve due to a change in price
question
Changes in demand
answer
shifts of the demand curve due to changes in goods
question
Scalping
answer
result of a shortage; set number that applies to selling tickets
question
Economic pros of scalping
answer
helps price reach a true price equilibrium, generates a more efficient outcome, trade creates value
question
Determinants of demand
answer
prices of related goods, changes in income, expected future price levels, population, and preferences
question
Substitutes
answer
goods and services that can be used for the same purpose; price decreases when quantity decreases
question
Complements
answer
two goods for which an increase in the price of one leads to a decrease in the demand for the other
question
Normal good
answer
a good that consumers demand more of when their incomes increase; price increases when quantity decreases
question
Inferior good
answer
a good that consumers demand less of when their incomes increase; price decreases when quantity decrease
question
Changes in quantity supplied
answer
movement along the supply curve due to a change in price
question
Changes in supply
answer
shift in the supply curve due to changes in the determinants of supply
question
Determinants of supply
answer
prices of factors of production, technological advance, prices of goods related in production, the number of firms, expectations about future prices, taxes and subsidies, and natural disaster
question
Substitutes in production
answer
goods that can be produced by using the same resources (writing paper and paper boxes)
question
Complements in production
answer
goods that are produced together (beef and leather)
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
