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microeconomics t1

micro ch 1-4 vocab

QuestionAnswer
Scarcity Limited resources and unlimited wants
Economics Study of how society manages its scarce resources
Efficiency The property of society getting the most from its scarce resources
Efficiency Getting maximum output from the resources available
Efficiency The property of a resource allocation of maximizing the total surplus received by all members of society
Equality The property of distributing economic prosperity uniformly among society's members
Equality The property of distributing prosperity uniformly among the members of society
Opportunity cost Whatever is given up to get something else
Opportunity cost Whatever is given up to get something else
Opportunity cost Whatever is given up to obtain some item
Marginal changes Incremental adjustments to an existing plan
Incentive Something that induces a person to act
Market economy An economic system where interaction of households and firms in markets determines the allocation of resources
Property rights The ability of an individual to own and exercise control over scarce resources
Property rights The ability of people to exercise control over their resources
Market failure A situation in which the market fails to allocate resources efficiently
Market failure The inability of some unregulated markets to allocate resources efficiently
Externality When one person's actions have an impact on a bystander
Externality The uncompensated impact of one person's actions on the well-being of a bystander
Externality When the actions of one person affect the well-being of a bystander
Market power The ability of an individual or group to substantially influence market prices
Productivity The amount of goods and services produced from each unit of labor input
Productivity The quantity of goods and services produced from each unit of labor input
Inflation An increase in the overall level of prices
Inflation The rate at which prices are rising
Inflation An increase in the overall level of prices
Business cycle Fluctuations in economic activity
rational people people who systematically and purposefully do the best they can to achieve their objectives
Circular-flow diagram A diagram of the economy that shows the flow of goods and services, factors of production, and monetary payments between households and firms
Production possibilities frontier A graph that shows the combinations of output the economy can possibly produce given the available factors of production and the available production technology
Macroeconomics The study of economy-wide phenomena
Microeconomics The study of how households and firms make decisions and how they interact in markets
Positive statements Descriptions of the world as it is
Normative statements Prescription for how the world ought to be
Absolute advantage The ability to produce a good using fewer inputs than another producer
Comparative advantage The ability to produce a good at a lower opportunity cost than another producer
Market A group of buyers and sellers of a particular good or service
Competitive market A market in which there are many buyers and sellers so that each has a negligible impact on the market price
Quantity demanded The amount of a good that buyers are willing and able to purchase
Law of demand The claim that, other things equal, the quantity demanded of a good falls when the price of the good rises
Demand schedule A table that shows the relationship between the price of a good and the quantity demanded
Demand curve A graph of the relationship between the price of a good and the quantity demanded
Normal good A good for which, other things equal, an increase in income leads to an increase in demand
Inferior good A good for which, other things equal, an increase in income leads to a decrease in demand
Substitutes Two goods for which an increase in the price of one leads to an increase in the demand for the other
Complements Two goods for which an increase in the price of one leads to a decrease in the demand for the other
Quantity supplied The amount of a good that sellers are willing and able to sell
Law of supply The claim that, other things equal, the quantity supplied of a good rises when the price of the good rises
Supply schedule A table that shows the relationship between the price of a good and the quantity supplied
Supply curve A graph of the relationship between the price of a good and the quantity supplied
Equilibrium A situation in which the price has reached the level where quantity supplied equals quantity demanded
Equilibrium price The price that balances quantity supplied and quantity demanded
Equilibrium quantity The quantity supplied and the quantity demanded at the equilibrium price
Surplus A situation in which quantity supplied is greater than quantity demanded
Shortage A situation in which quantity demanded is greater than quantity supplied
Law of supply and demand The claim that the price of any good adjusts to bring the quantity supplied and quantity demanded for that good into balance
Created by: romoore245
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