Microeconomics- CLEP

Objective statements that can be tested or rejected by referring to the available evidence. Positive economics deals with objective explanation. For example: "A rise in consumer incomes will lead to a rise in the demand for new cars."

These are value judgements or opinions. These statements cannot be scientifically proved or disproved. They often include words such as 'should', 'ought', 'fair', 'unfair', 'too much' and 'too little.

How to allocate scarce resources: "Make the best out of what we have."

A simplified version of reality used to analyze real-world economic situations

Cost of the next best alternative use of money, time, or resources when one choice is made rather than another.

1) What to produce (production decision)? 2) How to produce it (resource use decision)? and 3) For whom to produce it (distributional decision)?

decisions based on the additional benefits and costs of small changes in a particular activity

The branch of economics that focuses on how human behavior affects the conduct of affairs within narrowly defined units, such as individual households or business firms.

A Latin term meaning "other things constant" that is used when the effect of one change is being described, recognizing that if other things changed, they also could affect the result. Economists often describe the effects of one change, knowing that in the real world, other things might change and also exert an effect.

The incorrect assumption that one event causes another because the two events tend to occur together.

How many units of a good or service consumers are willing and able to buy at one specified price.

A graph of the relationship between the price of a good and the quantity demanded

A table that shows the relationship between the price of a good and the quantity demanded

a factor other than price that can cause a change in demand for a good or service; examples include changes in consumer incomes or tastes

Two goods for which the increase in price of one increases the demand for the other.

Two goods for which the increase in price of one reduces the demand for the other.

A good for which the demand increases as income rises and decreases as income falls

A good that consumers demand less of when their income increases

A movement from one point to another on a fixed supply curve.

A graph of the relationship between the price of a good and the quantity supplied

A table that shows the relationship between the price of a good and the quantity supplied

A change in the quantity supplied of a good or service at every price; a shift of the supply curve to the left or right.

factors that create a change in the supply of an item

tax rate increases along with income

stays the same as income increases

a tax that tends to take a larger percentage of the incomes of lower income citizens than it takes from the incomes of higher income citizens.