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Econ 201

Chapters 1-4

The study if the allocation of our limited resources to satisfy our unlimited wants. Economics
people want more than is available. It limits us, as individuals, and as a society.-Individuals have budgets, Society has natural resources, man power, machinery, ect. Scarcity
It requires choice, people must choose which desires will be fulfilled, and which wont. Scarcity
Where there is scarcity and choice, there is this.It is what you give up to do something.Ex: Going to class costs time that could be used doing something else.` Cost
The satisfaction a person receives from consuming a good or service. Utility
Basic technique used in economics that analyzes small, incrimental changes in key variables. Marginal Analysis
All things equal. Ceteris Paribus
Assumptions that factors other than those being considered do not change. Other-things-equal Assumption
Individual person, household, a firm or industry. Microeconomics
The economy as a whole. Macroeconomics
Statements that focus on facts. (What is) Positive statements
Statements that focus on values. (What ought to be) Normative statements
Unlimited wants, limited resources. Economizing problem
Seperates what IS affordable from what is NOT.-it proves scarcity, opportunity cost, choice and income change. Budget line
Buy less of one, to get more of the other. Trade-off
Land- includes all natural resourcesLabor- workersCapital- anything that constitutes an investment besides money.Entreprenuerial ability- person who takes risks and open their own business. Factors of production
Designed to model the output possible for a two product economy (intensly theoretical)-Designed to prove opportunity cost, and scarcity, and how certain advancements can cause increases in output. Production possibility curve
-Government owns resources.-Central planning board makes all the decisions on how resources are used. Command system (communism and socialism)
-Privately owned resources.-Freedom of enterprise and choice.-Self interest.-Competition-Markets and prices-Technology and Capital goods-Specialization-Active, but limited government Market system
Government owns all resources Communism
Government controls only key industries.(Schools, hospitals ect.) Socialism
Where buyers and sellers meet. Market
The curve that looks at buyers and sellers. Demand curve
A market that:-Has many buyers and sellers.-A uniform product.-Free entry and exit.-No one firm, or individual controls price. Perfectly competitive market
As price increases quantity demanded decreases. (the lower the price, the higher the probability of a consumer to buy. Law of demand
This is the premise on which buffet resturaunts operate. The more you use the item, the less utility you receive. Diminishing Marginal Utility
Change in quantity demanded of a product exclusively associated with a change in income. Income effect
Something used in place of something else, but at a lower price. Substitution effect
P-> Price of related goodsI-> IncomeN-> Number of buyersT-> Taste/PreferenceE-> Consumer expectations Factors that shift the WHOLE demand curve
Goods whose consumtion increases when income increases. (most goods, like new clothes) Normal goods
Goods whose consumtions increases when income decreases. (used clothes or used things) Inferior goods
A schedule or curve showing the various amounts of a product that producers are willing and able to make. Supply
P-> Prices of related goodsE-> Expectations of suppliersS-> # of suppliersT-> TechnologyS-> Suppliers resource pricesS-> SubsidiesT-> Taxes Factors that shift the WHOLE supply curve
Government payment to individuals or businesses to encourage or protect a certain type of economic activity Subsidies
A statement about economic behavior or the economy that enables prediction of the probable effects of certain actions. Economic principle
-Generalization-Other-Things-Equal Assumtion-Graphical Expression The Economic principles
Products that satisfy our wants indirectly by making possible more efficient production of consumer goods. Capital goods
Products that satisfy our wants directly. Consumer goods
As price rises, quantity supplied rises, vise versa. Law of supply
Products that have expected lives of three years or more.(ex: cars, furniture, computers) Durable goods
Products that have lives of less than three years. (Ex: food, gas, clothes) Nondurable goods
A physical establishment that performs one or more functions in fabricating and distributing goods and services.(Factory, farm, mines, stores, warehouses, ect.) Plant
An organization that employs resources to produce goods and services for profit and operates one or more plants. Firm
A group of firms that produce the same, or similar, products. Industry
The principals are the stockholders who own the corporation and who hire executives as their agents to run the business on their behalf. But the interests of these managers (the agents) and the wishes of the owners (the principals) do not always coincide. Principal-agent problem
Production or consumption costs inflicted on a third party without compensation.(ex: when chemical manufacturer dumps waste in lakes or rivers, and people who drink that water suffer external cost) Negative externalities
The externalities that appear as benefits to other producers and consumers.(ex: Immunization against measles and polio result in direct benefits to the immediate consumer of those vaccines) Positive externalities
Created by: hanalei1
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