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Microeconomics Ch1-4
| Term | Definition |
|---|---|
| economics | the study of how people deal with scarcity |
| scarcity | the situation in which the quantity of resources is insufficient to meet all wants. |
| choice | a selection among alternative goods, services, or actions. |
| economic interactions | exchanges of goods and services between people |
| market | an arrangement by which economic exchanges between people take place. |
| opportunity cost | the value of the next-best forgone alternative that was not chosen because something else was chosen. |
| budget constraint | a restrictions on a consumer's ability to spend. |
| gains from trade | improvements in income production or satisfaction owing to the change of goods or services. |
| specialization | a concentration of production effort on a single specific task. |
| division of labor | the decision of production into various parts in which different groups of workers specialize. |
| comparative advantage | a situation in which a person or group can produce one good at a lower opportunity cost than another person or group. |
| production possibilities | alternatie combinations of production of various goods that are possible, given the economy's resources. |
| technology | the recipe of production, a description of how resources are combined to create an output. |
| market economy | an economy characterized by freely determined prices and the free exchange of goods and services in markets. |
| freely determined prices | prices that are determined by the individuals and firms interacting in markets. |
| property rights | rights over the use, sale, and proceeds from a good or resource. |
| incentive | a device that motivates people to take action, usually to increase economic efficiency. |
| market failure | any situation in which the market does not lead to an efficient economic outcome and in which the government has a potential role. |
| government failure | the situation in which the government fails to improve on the market or even makes things worse. |
| financial crisis | disruptions to financial markets which make it difficult for people and business firms to borrow and obtain loans. |
| recession | a decline in production and employment that lasts for six months or more. |
| economic variables | any economic measure that can vary over a range of values |
| controlled experiment | empirical tests of theories in a controlled setting in which particular effects can be isolated. |
| experimental economics | a branch of economics that uses laboratory experiments to analyze economic behavior. |
| economic model | an explanation of how the economy or part of the economy works. |
| microeconomics | the branch of economics that examines individual decision making at firms and households and the way they interact in specific industries and markets. |
| macroeconomics | the branch of economics that examines the workings and problems of the economy as a whole-GDP growth and unemployment. |
| Gross Domestic Product(GDP) | a measure of the value of all the goods and services newly produced in an economy during a specified period of time. |
| positively related | a situation in which an increase in one variable is associated with an increase in another variable; also called directly related. |
| negatively related | a situation in which an increase in one variable is associated with a decrease in another variable; also called inversely related. |
| Ceteris paribus (all other things being equal) | refers to holding all other variables constant or keeping all other things the same when one variable changes. |
| capitalism | an economic system based on a market economy in which capital is individually owned, and production and employment decisions are decentralized. |
| socialism | an economic system in which the government owns and controls all the capital and makes decisions about prices and quantities as part of a central plan. |
| mixed economy | a market economy in which the government plays a very large role. |
| positive economics | economic analysis that explains what happens in the economy and why, without making recommendations about economic policy. |
| normative ethics | economic analysis that makes recommendations about economic policy. |
| demand | a relationship between price and quantity demanded. |
| price | the amount of money or other goods that one must pay to obtain a particular good. |
| quantity demanded | the quantity of a good that people want to buy at a given price during a specific time period. |
| demand schedule | eight tabular presentation of demand showing the price and quantity demanded for a particular good, all else being equal. |
| law of demand | the tendency for the quantity demanded of a good in the market to decline as its price rises. |
| demand curve | a graph of demand showing the downward sloping relationship between price and quantity demanded. |
| normal good | a good or which demand increases with income rises and decreases with income falls |
| inferior good | a good or which demand increases when income rises and increases when income falls. |
| a shift in the demand curve | the demand curve shows how the quantity demanded of a good is related to the price of the good, all other things being equal. A change in one of these other things-the weather, for example, will shift the demand curve, as shown in our graphs. |
| substitue | a good that has many of the same characteristics as, and can be used in place of another good. |
| complements | a good that is usually consumed or used together with another good |
| supply | a relationship between price and quantity supplied. |
| quantity supplied | the quantity of a good that firms are willing to sell at a given price. |
| supply schedule | eight tabular presentation of supply showing the price and quantity supplied of a particular good, all else being equal. |
| law of supply | this tendency for the quantity supplied of a good in a market to increase as its price rises. |
| supply curve | a graph of supply showing the upward sloping relationship between price and quantity supplied. |
| shortage (excess demand) | a situation in which quantity demanded is greater than quantity supplied. |
| surplus (excess supply) | a situation in which quantity supplied is greater than quantity demanded. |
| equilibrium price | the price at which quantity supplied equals quantity demanded. |
| equilibrium quantity | the quantity traded at the equilibrium price. |
| market equilibrium | the situation in which the price is equal to the equilibrium price and the quantity traded equals the equilibrium quantity. |
| price control | the government law or regulation that sets or limits the price to be charged for a particular good. |
| price ceiling | the government price controls that sets the maximum allowable price of a good. |
| price floor | a government control that sets the minimum allowable price for a good. |
| rent control | a government price control the maximum allowable rent on a house or apartment. |
| minimum wage | a wage per hour below which it is illegal to pay workers. |
| price elasticity of demand | the percentage change in the quantity demanded of a good divided by percentage change in the price of that good. |
| unit three major | a measure that does not depend on any unit of measurement. |
| elastic demand | demand for which the price elasticity is greater than one. |
| inelastic demand | demand for which the price elasticity is less than one. |
| perfectly inelastic demand | demand for which the price elasticity is zero, indicating no response to a change in price and therefore a vertical demand curve. |
| perfectly elastic demand | demand for which the price elasticity is infinite, indicating in infinite response to a change in price and therefore a horizontal demand curve. |
| income elasticity of demand | the percentage change in quantity demanded of a good divided by the percentage change in income. |
| cross price elasticity of demand | the percentage change in the quantity demanded of one good divided by the percentage change in the price of another. |
| price elasticity of supply | the percentage change in quantity supplied divided by the percentage change in price |
| perfectly elastic supply | supply for which the price elasticity is infinite, indicating an infinite response of quantity supplied and therefore a horizontal supply curve. |
| perfectly inelastic supply | supply for which the price elasticity is zero, indicating no respond of the quantity supplied and therefor a vertical supply curve. |
Created by:
leeannaepling
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