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Econ-MAcro
Marcoeconomics Chapter 2 & 3
| Term | Definition |
|---|---|
| Economic System | A particular set of institutional arrangements and a coordinating mechanism for producing goods and services. |
| Command System | An economic system in which most property resources are owned by the government and economic decisions are made by a central government body. |
| Market System | An economic system in which property resources are privately owned and markets and prices are used to direct and coordinate economic activities. |
| Capitalism | An economic system in which property resources are privately owned and markets and prices are used to direct and coordinate economic activities |
| Private Property | The right of private persons and firms to obtain, own, control, employ, dispose of, and bequeth land, capital and other property. |
| Freedom of Enterprise | The freedom of firms to obtain economic resources, to use these resources to produce products of the firm's own choosing, and to sell their products in markets of their choice. |
| Freedom of Choice | The freedom of owners of property resources to employ or dispose of them as they see fit, and of consumers to spend their incomes in a manner that they think is appropriate |
| Self-Interest | That which each firm, property owner, worker and consumer believes is best for itself. |
| Competition | The presence in a market of a large number of independent buyers and sellers competing with one another and the freedom of buyers and sellers to enter and leave the market. |
| Market | Any institution or mechanism that brings together buyers and sellers of particular goods, services, or resources for the purpose of exchange. |
| Specialization | The use of the resources of an individual, a firm, a region, or a nation to produce one or a few goods and services |
| Division of Labour | Dividing the work required to produce a product into a number of different tasks that are performed by different workers. |
| Barter | The exchange of one good or service for another good or service. |
| Medium of Exchange | Items sellers generally accept and buyers generally use to pay for a good or service |
| Money | Any item that is generally acceptable to sellers in exchange for goods and services |
| Consumer Sovereignty | Determination by consumers of the types and quantities of goods and services that will be produced with the scarce resources of the economy |
| Dollar Votes | The "votes" that consumers and entrepreneurs cast of the production of consumer and capital goods, respectively, when they purchase then in product and resource markets. |
| Economic Efficiency | Obtaining the socially optimal amounts of goods and services using minimum necessary resources |
| Guiding Functions of Prices | The ability of price changes to bring about changes in the quantities of products and resources demanded and supplied. |
| Circular Flow diagram | Depiction of the flows of resources from households to firms and of products from firms to households. These flows are accompanied by reverse flows of money from firms to households and households to firms. |
| Households | One or more persons accupying a housing unit, who buy businesses' goods and services in the product market using income derived from selling resources in the factor market |
| Business | An economic entity (firm) that purchases factors of production and provides goods and services to the economy. |
| Sole Proprietorship | An unincorporated firm owned and operated by one person |
| Partnership | An unincorporated firm owned and operated by two or more people |
| corporation | A legal entity chartered by the federal or provincial government that operates as a distinct and separate body from the individuals who own it. |
| Credit | An accounting item that increases the value of an asset |
| Product Market | A market in which products are sold by firms and bought by households. |
| Factor Market | A market in which households sell and firms buy factors of production. |
| Demand | A schedule or curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time. |
| Law of Demand | Other things equal, as prices falls the quantity demanded rises, and vice versa. |
| Quantity Demanded | The amount of a good or service buyers (or a buyer) desire to purchase at a particular price during some period. |
| Diminishing Marginal Utility | As a consumer increases the consumption of a good or service, the marginal utility obtained from each additional unit of the good and service decreases. |
| Income Effect | A change in the price of a product changes a consumer's real income (purchasing power) and this the quantity of the product purchased. |
| Substitution Effect | A change in the price of a product changes the relative expensiveness of that good and hence changes the willingness to buy it rather that another good. |
| Demand Curve | A curve illustrating the inverse (negative)relationship between the quantity demanded of a good or service and its price, other things equal. |
| Determinants of Demand | Factors other than price that determine the quantities demanded of a good or service. |
| Increase in Demand | An increase in the quantity demanded of a good or service at every price; a shift of the demand curve to the right |
| Normal Good | A good or service whose consumption rises when income increases and falls when income decreases, price remaining constant |
| Inferior Good | A good or service whose consumption falls when income increases and rises when income decreases, price remaining constant |
| Substitution Good | Products and services that can be used in place of each other |
| Complementary Goods | Products and services that are used together |
| Expectation | The anticipation of consumers, firms, and others about future economic conditions. |
| Change in Demand | A change in the quantity demanded of a good or service at every price; a shift of the entire demand curve to the right or to the left |
| Change in Quantity Demanded | A movement form one point to another on a fixed demand curve. |
| Supply | A schedule or curve that shows the amoutns of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specific time |
| Quantity Supplied | The amount of a good or service producers offer to sell at a particular price during some period. |
| Law of Supply | The principle that, other things equal, as increase in the price of a product will increase the quantity of it supplied, and a decrease in the price of a product will decrease the quantity of it supplied. |
| Supply Curve | A curve illustrating the positive(direct) relationship between the quantity supplied of a good or service and its price, other things equal. |
| Determinants of Supply | Causes other than prices that determine the quantities supplied of a good or service. |
| Change in Supply | 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 |
| Increase in Supply | An increase in the quantity supplied of a good or service at every price |
| Change in Quantity Supplied | A movement from one point to another on a fixed supply curve. |
| Equilibrium Price | The price in a competitive market at which the quantity demanded and the quantity supplied equal. |
| Equilibrium Quantity | The quantity demanded and supplied at the equilibrium price in a competitive market. |
| Surplus | The amount by which the quantity supplied of a product exceeds the quantity demanded at a specific price |
| Shortage | The amount by which the quantity demanded of a product exceeds the quantity supplied at a specific price. |
| Rationing Function of Prices | The ability of the competitive forces of supply and demand to establish a price at which selling and buying decisions are constant. |
| Productive Efficiency | The production of a good in the least costly way |
| Allocative Efficiency | The distribution of resources among firms and industries to produce the goods most wanted by society |
| Price Ceiling | A legally established maximum price for a good or service. |
| Price Floor | A legally established price above an equilibrium price. |
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Heather619
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