question
Scarcity
answer
Unlimited wants and needs, combined with limited resources.
question
Controlled Economy
answer
The government answers the three economic questions.
question
Free Economy
answer
Also known as market economy, resources are owned by individuals rather than the government.
question
Mixed Economy
answer
Some goods and services are provided by the government and some by private enterprise.
question
Private Enterprise
answer
Based on independent decisions by businesses and consumers with only a limited government role regulating those relationships.
question
Profit Motive
answer
The use of resources to obtain the greatest profit.
question
Value
answer
Individual view of the worth of a product or service.
question
Demand
answer
A relationship between the quantity of a product consumers are willing and able to purchase and the price.
question
Law of Supply
answer
A relationship between the quantity of a product that produces are willing and able to provide and the price.
question
Macroeconomics
answer
Studies the economic behavior and relationships of an entire society.
question
Microeconomics
answer
Examines relationships between individual consumers and producers.
question
Demand Curve
answer
The relationship between price and the quantity demanded is often illustrated in a graph.
question
Law of Demand
answer
When the price of a product is increased, less will be demanded. When the price is decreased, more will be demanded.
question
Market
answer
an abstract concept encompassing the forces of supply and demand and the interaction between buyers and sellers.
question
Economic Resources
answer
Classified as natural resources, capital, equipment, and labor.
question
Supply Curve
answer
The graph of a relationship between price and quantity supplied.
question
Law of Supply
answer
As the price increases, more will be manufactured. As the price decreases, fewer will be manufactured.
question
Market Price
answer
The point where supply and demand for a product are equal.
question
Pure Competition
answer
Because the suppliers are unable to offer products that consumers view as unique, they must accept the prices the consumers will buy from another business. Many suppliers offer very similar products.
question
Monopoly
answer
A type of market in which one supplier offers a unique profit.
question
Oligopoly
answer
A few businesses offer very similar products or services.
question
Economic Utility
answer
The amount of satisfaction a consumer receives from the consumption of a particular product or service.
question
scarcity
answer
prevents us from being able to completely fulfill our desires
question
rationing
answer
allocating a limited supply of a good or resource among people who want more of it. when price performs the rationing function, those willing to give up the most receive the good.
question
capital
answer
human made resources
question
economic theory
answer
establishes reference points through definitions, postulates, and principles making cause and effect relationships.
question
opportunity cost
answer
highest valued alternative sacrificed when choosing in an option (like time).
question
economizing behavior
answer
choosing option that offers greatest benefit, resulting in purposeful or rational decision making
question
utility
answer
the subjective benefit or satisfaction that an individual expects from the choice of a specific alternative
question
marginal
answer
when making a choice between 2 alternatives individuals focus on the difference in costs and benefits between alternatives
question
secondary effects
answer
effects that may not be seen immediately (unintended consequences)
question
scientific thinking
answer
developing a theory from basic principles and testing it against the real world
question
positive economics
answer
attempts to determine "what is" among economic relationships
question
normative economics
answer
judgments about "what ought to be" in economic matters. based on value judgments.
question
ceteris paribus
answer
Latin term meaning "other things constant"
question
fallacy of composition
answer
erroneous view that that what is true for an individual is also true for the whole or group
question
microeconomics
answer
focuses on decision making of consumers, producers, and resource suppliers operating at a narrowly defined market
question
macroeconomics
answer
focuses on how the aggregation of individual micro-units affects our analysis and is concerned with prices, incentives, and outputs
question
the law of demand
answer
there is an inverse relationship between the price of a good or service and the quantity of it that consumers are willing to purchase
question
change in demand
answer
shift in entire demand curve
question
change in quantity demanded
answer
movement along the demand curve
question
opportunity cost of production
answer
sum of producers cost of each resource used to produce a good.
question
law of supply
answer
there is a direct relationship between the price of a good or service and the amount of it that suppliers are willing to produce which means the price and quantity producers wish to supply move in the same direction
question
equilibrium
answer
state in which conflicting forces of demand and supply are in balance
question
economic efficiency
answer
all potential gains from trade have been realized. Benefit>Cost
question
efficiency of market organization is based upon
answer
1. competitive markets 2. well-defined and enforced private-property rights
question
resource
answer
inputs used to produce goods and services
question
tax incidence
answer
method of distributing the burden of a tax. When taxes are imposed on sellers, buyers may have the burden if sellers simply raise prices.
question
tax rate
answer
per-unit amount of tax percentage rate at which the economic activity is taxed
question
who bears the tax weight when demand is relatively inelastic/supply is relatively elastic?
answer
buyers bear larger tax burden
question
average tax rate
answer
tax liability divided by taxable income (percentage)
question
progressive tax
answer
average tax rate rises with income
question
proportional tax
answer
average tax rate is the same at all income levels
question
marginal tax rate
answer
percentage of a dollar of income earned that must be paid in taxes
question
laffer curve
answer
illustrates the relationship between tax rate and revenues. The more an activity like production is taxed, the less revenue is generated as people shy away from the high taxed activity.
question
subsidy
answer
payment either to the buyer or seller of a good/service usually a per-unit basis
question
the law of diminishing marginal utility
answer
as consumption of a product increases the marginal utility will slowly decline
question
marginal utility
answer
additional utility or satisfaction derived from consuming an additional unit of a good
question
marginal benefit
answer
maximum price a consumer is willing to pay for an additional unit of a product
question
inelastic demand creates this type of demand curve
answer
steep, change in Price doe not dramatically affect quantity demanded
question
elastic demand creates this type of demand curve
answer
flat, changes in price affect demand
question
normal good
answer
as income increases, so does the price of goods
question
inferior good
answer
as consumer income rises the demand for the good falls
question
residual claimants
answer
individuals who personally receive the excess, if any, revenue
question
team production
answer
employees work together under the supervision of owner or owner's representative
question
implicit costs
answer
opportunity costs associated with a firm's use of resources that it owns
question
total cost
answer
explicit and implicit costs added
question
opportunity cost of equity capital
answer
rate of return that must be earned by investors to encourage them to supply financial capital to the firm
question
economic profit
answer
difference between firm's total revenues and its total costs (including explicit and implicit)
question
normal profit rate
answer
zero economic profit, providing just the competitive rate of return on the capital (and labor) of owners, drawing more entry into the market
question
accounting profits
answer
sales revenue minus expenses of a firm over a designated time period, usually 1 year
question
total fixed costs
answer
sum of costs that don't vary with output
question
average fixed cost
answer
total fixed cost divided by number of units produced
question
average total cost
answer
total cost divided by number of units produced
question
marginal cost
answer
change in total cost required to produce an additional unit
question
law of diminishing returns
answer
as more and more units of a variable factor are applied to a fixed amount of other resources output will eventually increase by smaller and smaller amounts (constraint imposed by nature)
question
marginal product
answer
increase in total product resulting from a unit increase in the employment of a variable input
question
economies of scale
answer
reductions in the firm's per-unit costs associated with the use of large plants to produce a large volume of output
question
objective
answer
non-opinion fact based concept about a situation. Scarcity is objective
question
Subjective
answer
an opinion based on personal preferences and value judgement. Poverty is subjective.
question
Substitutes
answer
Products that serve similar purposes. An increase in price in one will cause an increase in demand for the other. (tacos and hamburgers)
question
Consumer Surplus
answer
Difference between the maximum price consumers are willing o pay and the price they actually pay. net gain for buyers of a good.
question
Complements
answer
Products consumed jointly, bread and butter.
question
Factors that Change Quantity demanded
answer
Changed price of a good
question
Factors that change demand
answer
Consumer income, Number of consumers, price of substitute or complement, demographic changes, consumer preferance
question
Loss
answer
a deficit of sales revenue relative to opportunity cost
question
Producer Surplus
answer
the difference in what a producer is wiling to receive and what they actually receive.
question
factors that change Quantity Supplied vs Supply
answer
QS=Change in price of good. S+resource prices, tech advancement, weather/ taxes
question
Invisible Hand Principle
answer
tendency of market prices to direct individuals pursuing their own interests to engage in promoting economic well-being of society
question
resource market
answer
Market of inputs used to promote goods and services
question
Price controls
answer
Gov mandated prices that are imposed on form of max or min price
question
price ceiling
answer
legal max price sellers can charge. (lack market grows, future supply decreases,quality deteriorates, Subjective nonprice factors play more of a role.
question
shortage
answer
demand of a good at the market price is greater than supply. An increase in price would eliminate shortage
question
Price floor
answer
Legal min price
question
Surplus
answer
Condition which amount of good offered is greater than amount buyers will purchase. Declined price will fix this.
question
Minimum wage
answer
Legislative mandate for workers min pay. Jobs available will shrink usually for unskilled workers
question
Black market
answer
Market outside of legal system of illegal goods or legal goods sold at illegal prices or terms
question
tax base
answer
Level or quantity of an economic activity that is taxed. Higher tax rates decreases tax base as the activity is less attractive
question
Deadweight loss/excess burden of taxation
answer
loss of gains from trade due to taxes being imposed.
question
regressive tax
answer
Tax where average tax rate falls with income.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
