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Micro-Econ 1

Chapters 1

Scarcity Lack of enough resources to satisfy all desired uses of those resources.
Factors of Production Resource inputs used to produce goods and services, e.g., land, labor, capital, entrepreneurship.
Capital Final goods produced for use in the production of other goods, such as equipment and structures.
Entrenpreneurship The assembling of resources to produce new or improved products and technologies.
Economics The study of how best to allocate scarce resources among competing uses.
Opportunity Cost The most desired goods or services that are forgone in order to obtain something else.
Production Possibilities The alternative combinations of final goods and services that could be produced in a given period with all available resources and technology.
Efficiency Maximum output of a good from the resources used in production. (1, 21, 23)
Economic Growth An increase in output (real GDP); an expansion of production possibilities. (1, 2, 17, 37)
Market Mechanism The use of market prices and sales to signal desired outputs (or resource allocations). (1, 3, 4, 23)
Laissez Faire The doctrine of “leave it alone,” of nonintervention by government in the market mechanism. (1, 8, 27)
Mixed Economy An economy that uses both market signals and government directives to allocate goods and resources. (1)
Market Failure An imperfection in the market mechanism that prevents optimal outcomes. (1, 4, 25, 27, 28, 33, 34)
Government Failure Government intervention that fails to improve economic outcomes. (1, 4, 27, 28, 33)
Macroeconomics The study of aggregate economic behavior, of the economy as a whole. (1, 8)
Microeconomics The study of individual behavior in the economy, of the components of the larger economy. (1)
Ceteris Paribus The assumption of nothing else changing. (1, 3, 19)
What opportunity costs did you incur in reading this chapter? If you read another chapter today, would your opportunity costs (per chapter) increase? Explain. The most desired activity you give up is the value of the opportunity cost. In this case, the first hour would be spending time with my son. 2nd hour, maybe hanging out with my boyfriend and so on. So the opportunity could increase.
How much time could you spend on homework in a day? How much do you spend? How do you decide? A person decides how much time to spend on homework based on the perceived payoff, Those activities that are perceived as giving the most benefit are completed first. At some point HW will become less of a benefit.
What’s the real cost of the food in the “free lunch” cartoon on page 6? Even if a bar doesn’t charge for lunch, preparation of the lunch requires the use of scarce resources. The workers at this bar will spend considerable time preparing this lunch and could potentially have spent this time doing something else.
GDP (Gross Domestic Product. The total market value of all final goods and services produced within a nation's borders in a given time period. (2, 5)
Per Capita GDP The dollar value of GDP divided by total population; average GDP. (2)
Economic Growth An increase in output (real GDP); an expansion of production possibilities. (1, 2, 17, 37)
Human Capital The knowledge and skills possessed by the workforce. (2, 16, 17, 37)
Capital Incentive Production processes that use a high ratio of capital to labor inputs. (2)
Productivity Output per unit of input—for example, output per labor-hour. (2, 17, 21, 31, 37)
Externalities Costs (or benefits) of a market activity borne by a third party; the difference between the social and private costs (benefits) of a market activity. (2, 4)
Monopoly A firm that produces the entire market supply of a particular good or service. (2, 4, 22, 24)
Income Quintile One-fifth of the population, rank-ordered by income (e.g., top fifth). (2)
Demand The willingness and ability to buy specific quantities of a good at alternative prices in a given time period, <i>ceteris paribus.</i> (3, 19)
Utility The pleasure or satisfaction obtained from a good or service. (19)
Marginal Utility The change in total utility obtained by consuming one additional (marginal) unit of a good or service. (19)
Law of Diminishing Marginal Utility The marginal utility of a good declines as more of it is consumed in a given time period. (19)
Law of Demand The quantity of a good demanded in a given time period increases as its price falls, <i>ceteris paribus.</i> (3, 8, 19, 20)
Demand Curve A curve describing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period, <i>ceteris paribus.</i> (3, 19, 20)
Market Demand The total quantities of a good or service people are willing and able to buy at alternative prices in a given time period; the sum of individual demands. (3, 19)
Consumer Surplus The difference between the maximum price a person is willing to pay and the price paid. (19, 24)
Total Revenue The price of a product multiplied by the quantity sold in a given time period: <i>p</i> × <i>q</i>. (19, 20, 22)
Price Discrimination The sale of an individual good at different prices to different consumers. (19, 24)
Optimal Consumption The mix of consumer purchases that maximizes the utility attainable from available income. (19)
Shift in Demand A change in the quantity demanded at any (every) price. (3, 19)
Created by: joeylovesliam
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