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Microecon
Chapter 2 vocab
| Term | Definition |
|---|---|
| Model | simplified representation of a real situation that is used to better understand real-life situations |
| Other things equal assumption | means that all other relevant factors remain unchanged |
| Production Possibility Frontier (PPF) | graph that illustrates the trade-offs facing an economy that produces only two goods; shows maximum quantity of one good that can be produced for any given quantity produced of the other |
| Factors of Production | resources used to produce goods and services |
| Technology | technical means for producing goods and services |
| Comparative advantage | country/business has this in producing a good or service if its opportunity cost of producing the good or service is lower than in other countries/businesses |
| Absolute advantage | country/business has this in producing a good or service if the country can produce more output per worker than other countries/businesses |
| Barter | when people directly trade goods or services that they have for goods or services that they want |
| Circular-flow diagram | represents the transactions in an economy by flows around a circle |
| Household | a person or group of people that share their income |
| Firm | organization that produces goods and services for sale |
| Markets for goods and services | when households buy the goods and services they want from firms |
| Factor markets | when firms buy the resources the need to produce goods and service |
| Income distribution | way in which total income is divided among the owners of the various factors of production |
| Positive economics | branch of economic analysis that describes the way the economy actually works |
| Normative economics | branch of economic analysis that makes prescriptions about the way the economy should work |
| Forecast | simple prediction of the future |
| Causal relationship | relationship in which the value taken by one variable directly influences or determines the value taken by the other variable |
| Time-series graph | graph that has dates on the horizontal axis and values of a variable that occurred on those dates on the horizontal axis |
| Truncated | axis becomes this when some of the values on the axis are omitted, usually to save space |
| Omitted variable | an unobserved variable that, through its influence on other variables, creates the erroneous appearance of a direct causal relationship among those variables |
| Reverse causality | committed when the true direction of causality between two variables is reversed |
Created by:
David55900
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