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Econ 201 Test 1
| Question | Answer |
|---|---|
| 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 |
| gains from trade | gains from trade: improvements in income, production, or satisfaction owing to the exchange of goods or services |
| specialization | people concentrating their production efforts on what they are good at/ a concentration of production effort on a single specific task |
| division of labor | occurs when some workers specialize in one task while others specialize in another task/ the division 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 |
| international trade | the exchange of goods and services between people or firms in different nations |
| production possibilities | alternative combinations of production of various goods that are possible, given the economy’s resources |
| increasing opportunity cost | a situation in which producing more of one good requires giving up an increasing amount of production of another good |
| production possibilities curve | a curve showing the maximum combinations of production of two goods that are possible, given the economy’s resources |
| market economy | an economy characterized by freely determined prices and the free exchange of goods and services in markets |
| command economy | an economy in which the government determines process and production; also called a centrally planned economy |
| 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 / gives individuals the legal authority to keep or sell a property, land or resource |
| incentive | a device that motivates people to take action, usually so as to increase economic efficiency - ppl would have no incentive to invent or specialize in something |
| market failure | any situation in which the market does not lead to an efficient economic outcome and in which there is a potential role for government/ when market does not answer what how and for whom questions |
| government failure | the situation where the government fails to improve on the market or even makes things worse |
| relative price | the price of a particular good compared to the price of other things |
| economic variable | any economic measure that can vary over a range of values |
| controlled experiments | 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 a 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 |
| 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 economics | economic analysis that makes recommendations about economic policy |
| Cartesian coordinate system | a graphing system in which ordered pairs of numbers are represented on a plane by the distances from a point to two perpendicular lines, called axes |
| time series graph | a graph that plots a varable over time, usually with time on the horizontal axis |
| dual scale | a graph that uses time on the horizontal axis and different scales on the left and right vertical axes to compare the movements of two variables over time |
| scatter plot | a graph in which points in a Cartesian coordinate system represent the values of two variables |
| slope | a characteristic of a curve that is defined as the change in the variable on the vertical axis divided by the change in the variable on the horizontal axis |
| positive slope | a slope of a curve that is greater than zero, representing a positive or direct relationship between two variables |
| negative slope | a slope of a curve that is less than zero, representing a negative or inverse relationship between two variables |
| linear | a situation in which a curve is straight, with a constant slope |
| movement along the curve | a situation in which a change in the variable on one axis causes a change in the variable on the other axis, but the position of the curve is maintained |
| shift of the curve | a change in the position of a curve, usually caused by a change in a variable not represented on either axis |
| demand | a relationship between price and quantity demanded price |
| quantity demanded | the quantity of a good that people want to buy at a given price during a specific time period |
| demand schedule | a 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 a 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 for which demand increases when income rises and decreases when income falls |
| inferior good | a good for which demand decreases when income rises and increases when income falls |
| substitute | a good that has many of the same characteristics as, and can be used in place of another good |
| complement | 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 | a tabular presentation of supply showing the price and quantity supplied of a particular good, all else being equal |
| law of supply | the 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 |
| international trade | the exchange of goods and services between people or firms in different nations |
| tariff | a tax on imports |
| quota | a governmental limit on the quantity of a good that may be imported or sold |
| commerce clause | the clause in the U.S. Constitution that prohibits restraint of trade between states |
| comparative advantage | a situation in which a person or country can produce one good at a lower opportunity cost than another person or country |
| absolute advantage | a situation in which a person or country is more efficient at producing a good in comparison with another person or country |
| relative price | the price of a particular good compared with the price of other things |
| capital abundant | a higher level of capital per worker in one country relative to another |
| labor abundant | a lower level of capital per worker in one country relative to another |
| capital intensive | production that uses a relatively high level of capital per worker |
| labor intensive | production that uses a relatively low level of capital per worker |
| revenue tariffs | an import tax whose main purpose is to provide revenue to the government |
| Smoot-Hawley tariff | a set of tariffs imposed in 1930 that raised the average tariff level to 59 percent by 1932 |
| trade war | a conflict among nations over trade policies caused by imposition of protectionist policies on the part of one country and subsequent retaliatory actions by other countries |
| World Trade Organization (WTO) | an international organization that can mediate trade disputes |
| antidumping duty | a tariff imposed on a country as a penalty for dumping goods |
| nontariff barriers | any government action other than a tariff that reduces imports, such as a quota or a standard |
| infant industry argument | the view that a new industry may be helped by protectionist policies |
| multilateral negotiations | simultaneous tariff reductions on the part of many countries |
| Uruguay Round | a most recent round of multilateral negotiations, opened in 1986 and completed in 1993 |
| Doha Development Round | the latest round of multilateral negotiations, opened in November 2001 in Doha, Qatar |
| trade diversion | the shifting of trade away from the low-cost producer toward a higher-cost producer because of a reduction in trade barriers with the country of the higher-cost producer |
| trade creation | the increase in trade due to a decrease in trade barriers |
| free trade areas (FTA) | an area that has no trade barriers between the countries in the area |
| customs unions | a free trade area with a common external tariff |
Created by:
jenn14