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EconExam1
| Question | Answer |
|---|---|
| substitution effect | the desire and ability to find other, similar but now relatively other lower cost goods to satisfy given wants |
| income effect | higher/lower prices decrease/increase the purchasing power of our money income |
| economics | social science concerned with using scarce resources to obtain the maximum satisfaction of the unlimited material wants of society |
| macroeconomics | focuses on economy as a whole; aggregates such as total output, employment, overall price level |
| microeconomics | focuses on individual units and markets within the economy, including particular prices and specific goods and services |
| tradeoff | decision to use resources in a particular way means that we have also chosen not to use it in all other ways |
| opportunity cost | the value of the benefits given up when a resource is used in a particular way (value of sacrifice) |
| cost | unpleasant consequences |
| benefits | producing the most utility |
| exchange | enables both parties to trade goods of lesser value for goods they value more highly |
| law of demand | the inverse relationship between the price and the desired rate of purchase of a good or service during a period of time |
| decrease in supply | a decrease in the quantity supplied of a good or service at every price - a shift of the supply curve to the left |
| decrease in demand | a decrease in the quantity demanded of a good or service at every price - a shift of the demand curve to the left |
| shortage | the amount by which the quantity demanded of a product exceeds the quantity supplied at a given price (*need to increase price) |
| law of supply | the direct relationship between the price and the desired rate of selling of a good or service during a period of time |
| ceteris paribus | the higher the price of a good, the greater the desired rate of selling |
| surplus | the amount by which the quantity supplied of a product exceeds the amount of the quantity demanded at a given price |
| supply & demand | buying and selling decisions of suppliers determine price and quantity of a good in the market |
| increase in demand | an increase in the quantity demanded of a good or service at every price - shift right |
| increase in supply | an increase in the quantity supplied of a good or service at every price - shift right |
| non-price determinants of demand | 1)consumers' tastes or preferences 2)number of buyers 3)income 4)prices of related goods 5)expectations |
| net gain | excess of benefits received over value of what is given up |
| quantity demanded | amount of good or service buyers wish to purchase at a particular price (movement along the demand curve) |
| market price | reflects scarcity and provides important signals to potential traders about perceived value of resources |
| scarcity | limited availability of things we desire |
| utility | benefits individuals receive from owning/consuming goods and services |
| government involvement in markets | regulates individual decisions and prevents misallocation of resources |
| resources | factors of production (inputs) that are used to produce goods and services which give us utility |
| economizing problem | world in which material wants are unlimited while means to produce goods and satisfy wants are limited |
| human resources | quantity/quality of labor force as contributor to production of goods and services |
| efficiency | producing something at the lowest possible opportunity cost |
| inverse relationship | (negative) variables move in opposite directions |
| empirical relationship | derived from observation and objectivity reported using numbers |
| non-price determinants of supply | 1)input prices 2)business taxes/subsidies 3)technology 4)availability |
| quantity supplied | the amount of goods or services sellers offer to sell at a particular price - movement along a given supply curve |
| supply | relationship between the price of a good and the desired rate of selling |
| demand | relationship between the price of a good and the desired rate of purchasing |
| capital good | human made resources used to produce goods and services |
| PPC | shows the possible output given a certain amount of capital and labor |
| complementary goods | goods or services used together to satisfy a want (both goods necessary) |
| equilibrium price | the price in a competitive market at which the quantity demanded and the quantity supplied are equal |
| equilibrium quantity | the quantity demanded and quantity supplied at the equilibrium price |
| law of increasing opportunity cost | as the amount of a product is increased, the opportunity cost of producing an additional unit of the product increases |
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