TTU Microeconomics Final

The best alternative that we give up when we make a choice or decision

Limited

Process of analyzing the additional costs or benefits from a choice or decision

A market in which profit opportunities are eliminated instantaneously
"There is no such thing as a free lunch"

Examines the functioning of individual industries and the behavior of firms or households (small scale economics)

Examines economic behavior of aggregates-income, employment, inflation (nationwide economics)

The approach that attempts to understand behavior and operation without judgment. (What it is and how it
works)

The approach that looks at the outcomes of economic behavior. Asks whether they are good or bad and whether they can be made better.

A formal statement of a theory. Usually, a mathematical equation that shows the relationship between two or more variables

All else equal

The false assumption that one event happened because of another event

The collection and use of data to test economic theories

"Allocative Efficiency". An efficient economy is one that produces what people want at the least possible cost. Therefore if the market produces something that nobody wants, it is considered inefficient

An increase in the total output of an economy

A condition in which national output is growing steadily, with low inflation, and full employment of resources.

Known as inputs or resources. Land, labor, and capital are the key 3 inputs.

Things that are produced and then used in the production of other goods

The process of transforming resources into outputs

Anything provided by nature that can be used to satisfy human wants

Goods and services of value to households

Specialization and free trade will benefit all trading parties, even those that seem "absolutely" more efficient

When a firm can produce a good or service using fewer resources (lower cost per unit)

When a firm can produce a good or service at a lower opportunity cost

Goods produced for present consumption

A graph that shows all the combinations of goods and services that can be produced if the society uses all of its resources efficiently.
-Negatively sloped and bowed outward
-As you move up and down the curve, the opportunity cost increases for the product you are moving towards

-Curve shifts to the right if the economy experiences growth
-Unemployment and inefficiency corresponds to a point inside the curve
-Points outside of the curve are unrealistic because there are not enough resources to produce at that level

An economy in which the government has control over what gets produced. (The basic economic questions are answered by the government.)

"Allow to do". This economy has a lack of central government involvement. Households and firms can pursue their own self-interest without any government interference

The idea that consumers ultimately dictate what will be produced by choosing what to purchase, and vice versa

No economy is form of one economy or the other.

An organization that transforms resources into products. They are the primary producing units in a market economy

A person who organizes, manages, and assumes the risks of a firm. They turn and idea into a successful business.

Consuming units in an economy

The markets in which goods and services are exchanged

The markets in which the resources or inputs used to produce products are exchanged

The input market in which households supply labor for wages to firms that demand labor

The input market in which households supply their savings, for interest or for claims to future profits, for firms that demand funds to buy capital goods.

Where households supply land or other real property in exchange for rent

The amount of a product a household is willing to buy in a given period if they could buy all they wanted at the current market price.

A change in quantity demanded is a movement along the demand curve, while a change in demand is a shift in the whole curve

Sum of all the wages, salaries, profits, interest payments, rents, and other forms of earnings received by the household in a given period of time

Total value of what a household owns minus what it owes

Goods in which the demand goes up when income increases, but goes down when income decreases

Goods for which demand tends to fall when income rises

Products that can serve as replacements for another. When the price of one increases, the demand of the other increases
EX. Dr.Pepper and Coke

Goods that "go together". When the price decreases for one of the complementary goods, the demand rises for the other as well.
EX- Peanut butter and Jelly, Bacon and Eggs

-Change in price results in a movement along
-Change in income, preferences, or prices of other goods and services results in a shift

The amount of a particular product that firms would be willing and able to offer for sale at a particular price.

The positive relationship b/w price and quantity supplied. An increase in market price, ceteris paribus, will lead to an increase in quantity supplied and vice versa.

-Movement along the curve is caused by a change in price
-A shift in the curve is caused by factors other than price. Such as new technology or change in input prices

When Quantity supplied and quantity demanded are equal

When quantity demanded exceeds quantity supplied

When quantity supplied exceeds quantity demanded

The process of allocating goods and services to consumers when there is a shortage

the maximum price a firm may charge for a good or service (usually set by the government). Intended to make things affordable.

the minimum price a firm may charge for a good or service

Waiting in line, ration coupons,and favored customers

A market in which illegal trading takes place at market determined prices

When demand drops to zero at the slightest increase of price

When demand does not change at all when price increases

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