Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
54 Cards in this Set
- Front
- Back
Scarcity |
The condition in which wants are forever greater than the available supply of time, goods, and resources. |
|
3 Categories of Resources |
Land, Labor, and Capital |
|
Land |
Any natural resource provided by nature. (ex. plants, gas, oil, water, milk, etc.) |
|
Labor |
Mental/physical captivity for workers to provide goods and services. |
|
Capital |
Physical plant, machinery, and equipment used to produce other goods (and services) that don't satisfy wants. |
|
Resource |
The basic categories of inputs used to provide goods and services. |
|
Entrepreneurship |
A special form of resource and creative ability of individuals to seek profit by taking risks and combining resources to produce innovative products. |
|
3 Factors of Entrepreneurship |
Land, Labor, and Capital |
|
Economics |
The study of society chooses to allocate its scarce resources in order to satisfy unlimited wants/needs. |
|
2 Branches of Economics |
Macroeconomics and Microeconomics |
|
Macroeconomics |
Studies decision-making for the economy as a whole. |
|
Microeconomics |
Studies decision-making by a single individual household, firm, industry, or government. |
|
How do we study economics? |
Through model building. |
|
Economic Model |
A simplified description of reality used to understand and predict the relationship between variables. Why? Because we want to forecast or predict the results of changes in variables. |
|
Economic Model Process |
1.) Identify problem 2.) Develop a model based on simplified assumptions 3.) Collect data, test model, and formulate a conclusion |
|
Ceteris Paribus |
All other things remain unchanged or holding all other things constant. (ex. Health, time of day, etc.) |
|
Correlation |
There's a relationship between two variables. Price goes up, demand goes down. Price goes down, demand goes up. * Correlation does NOT imply causation. |
|
Positive Economics |
Economic analysis limited to statements that are verifiable. (ex. When ticket prices go down, popcorn sales increase.) |
|
Normative Economics |
An analysis based on a value judgement. (ex. It is a bad idea to lower ticket prices because ticket revenue will go down.) |
|
3 Fundamental Economic Questions |
1.) What to produce? 2.) How to produce? 3.) For whom to produce? |
|
Opportunity Cost |
The best alternative sacrifice for a chosen alternative "the next best thing". |
|
Marginal Analysis |
An examination of the additional benefits of an activity compared to the additional cost of that activity. When the marginal benefit is greater than the marginal cost, we will continue the activity. |
|
Production Possibilities Curve |
Shows the maximum combination of two outputs that an economy can produce, given its available resources and technology. 3 Assumptions 1.) Fixed resources 2.) Fully employed resources 3.) Technology remains unchanged |
|
Inefficient |
Resources are not fully employed. |
|
Unattainable |
Given resources and technology, we cannot produce outside the curve. |
|
How can we grow our economy? |
1.) Increase in resources. 2.) Technological change. |
|
Demand |
It represents choice-making behavior of buyers. |
|
Law of Demand |
There is an inverse relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period. |
|
Demand Curve |
A curve that shows quantities of a good or service that people are willing and able to buy at different prices. |
|
Non-price determinants of demand (aka demand shifters) |
1.) # of Buyers 2.) Tastes and Preferences 3.) Income 4.) Expectations of Buyers 5.) Price of related goods |
|
Technology |
The body of knowledge applied to how goods are produced. |
|
Law of Increasing Opportunity Costs |
The principle that the opportunity cost increases as production of one output expands. |
|
Economic Growth |
The ability of an economy to produce greater levels of output, represented by an outward shift of its production possibilities curve. |
|
Investment |
The accumulation of capital that is used to produce goods and services (ex. factories, machines, and inventories). |
|
Change in Quantity demanded |
A movement between points along a stationary demand curve, ceteris paribus. |
|
Change in Demand |
An increase (rightward shift) or decrease (leftward shift) in the quantity demanded at each possible price. |
|
Normal good |
Any good for which there is a direct relationship between changes in income and its demand curve. |
|
Inferior good |
Any good for which there is an inverse relationship between changes in income and its demand curve. |
|
Substitute good |
A good that competes with another good for consumer purchases. |
|
Complementary good |
A good that is jointly consumed with another good. |
|
Law of Supply |
The principle that there is a direct relationship between the price of a good and the quantity sellers are willing and able to offer for sale in a defined time period, ceteris paribus. |
|
Supply |
A curve/schedule showing the various quantities of a product sellers are willing to produce and offer for sale at possible prices during a specified period of time, ceteris paribus. |
|
Change in Quantity supplied |
A movement between points along a stationary supply curve, ceteris paribus. |
|
Change in Supply |
An increase (rightward shift) or decrease (leftward shift) in the quantity supplied at each possible price. |
|
Market |
Any arrangement in which buyers and sellers interact to determine the price and quantity of goods and services exchanged. |
|
Surplus |
A market condition existing at any price where the quantity supplied is greater than the quantity demanded. |
|
Shortage |
A market condition existing at any price where the quantity supplied is less than the quantity demanded. |
|
Equilibrium |
A market condition that occurs at any price at which the quantity demanded and the quantity supplied are equal. |
|
Price System |
A mechanism that uses the forces of supply and demand to create an equilibrium through rising and falling prices. |
|
Price Ceiling |
A legally established maximum price a seller can charge. |
|
Price Floor |
A legally established minimum price a seller can be paid. |
|
Market Failure |
A situation in which market equilibrium results in too few or too many resources being used in the production of a good or service. |
|
Externality |
A cost or benefit imposed on people other than the consumers and producers of a good or service. |
|
Public Good |
A good or service with two properties: (1) users collectively consume benefits, and (2) there is no way to bar people who do not pay (free riders) from consuming the good or service. |