Term
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Definition
| the discrepancy between limited resources and unlimited desires. |
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Term
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Definition
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Term
| Basic Economic Question 1. What? |
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Definition
| What goods and services to produce? demand is determiner, price is indicator. |
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Term
| Basic Economic Question...2. How? |
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Definition
| How best to produce the goods and services determined by 'What?', Determine which of 4 basic resource groups you will use. Labor, Capital, Land, Entrepreneurial and how much of each. |
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Term
| Basic Economic Question...3. For Whom? |
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Definition
| Distribution. capatilist systems may use marketing - to those who can afford to buy and some subsidies., |
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Term
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Definition
| 1. Traditional (barter), 2. Capitalist, 3. Socialist, 4. Mixed. |
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Term
| Traditional Economic System |
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Definition
| The Barter System. trading one product for another. Works best in small economies-in large economies requires much trading to get goods one actually wants or needs. |
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Term
| Capitalist Economic System |
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Definition
| Market Economy or Free Enterprise or Laissez-faire ("let it be"). Private business free to operate and compete with very little government regulation. Value of goods and services determined by competitive market-requires many buyers and sellers to avoid monopolies. |
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Term
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Definition
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Term
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Definition
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Term
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Definition
| "let it be" in french. Describes Capitalist System of little to no government involvement. |
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Term
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Definition
| Used in Wealth of Nations by Adam Smith to describe why, though the individual is selfish, his actions can also benefit the whole community. |
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Term
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Definition
| Scottish philosopher wrote The Wealth of Nations. Considered the father of economics. |
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Term
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Definition
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Term
| Conditions required for the invisible hand to work |
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Definition
| 1. stable property rights, 2. economic freedom to use property or consume whatever people wish. |
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Term
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Definition
| 1 of 2 conditions necessary for the invisible hand of the free market/capitalist system to work. Requires that people have a clear, stable, continuing right to personal property. |
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Term
| Economic freedom is required for the successful _______ effect. |
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Definition
| 1 of 2 conditions required for the 'invisible hand' of the free market/capitalist system to work. People must be able to own and or consumer what they wish. |
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Term
| Competition (define for free market) |
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Definition
| in a free market it is a process of discovering new and better ways to use resources. |
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Term
| Social Cooperation and the Market |
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Definition
| free markets require the participation of the consumer to determine the real value of goods and services. The consumers require the cooperation of the producers to respond to demand/price and provide those products and services consumers value. |
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Term
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Definition
| 1 of 4 basic economic systems. aka centerally-planned system or command economy. private enterprise abolished, government owned property and economic planners decide what, how and for whom, prices and wages set by planners. System is difficult to manage because no venue for reliable informaiton for planners to act on. |
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Term
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Definition
| 1 of 4 basic economic systems. government plays a role along side the private sector. |
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Term
| One way to determine relative economic freedom in a country |
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Definition
| determine how much of the GDP is made up of government spending. The more government spending, the less consumer input the market receives. |
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Term
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Definition
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Term
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Definition
the difference in cost/resources used/time between action chosen and the best foregone alternative
(produce another product, be in one place rather than another) |
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Term
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Definition
| opportunity costs = losses/gains or opportunity costs = best option foregone-choice made. |
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Term
| Production Possibilities Curve (PPC) |
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Definition
| reflects the maximum number of goods that a society can produce at any given time, with the given resources and know-how (technology). Note: reflects Technical Efficiency, not Economic Efficiency. Does not take into account what society wants, just the most efficient use of resources. |
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Term
| 3 assumptions when studying Production Possibility Curve |
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Definition
| a) resources (land, labor force, capital and entrepreneurship skills)are fixed, but each of the resources can be used to produce different types of goods and services. b)all the resources are fully and efficiently used. c)Technology (know-how) which includes the quality of the capital (machinery) and the education of the labor force, stays as it is. (know-how is assumed to remain constant for the given period. |
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Term
| Shape of the Production Possibilities Curve |
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Definition
| concave as a result of the increasing opportunity costs. Also called a frontier line or boundary. |
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Term
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Definition
| the area beyond the Production Possibility curve/boundry/frontier that indicates an unattainable outcome due to insufficient resources or know-how. |
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Term
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Definition
| The area within the Production Possibility curve which indicates production that does not efficiently utilize all resources and know-how. |
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Term
| Efficient Use of Resources |
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Definition
| when an economy is producing at its maximum. Indicated by existing on the Production Possibility Curve/boundry/frontier. |
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Term
| Opportunity Cost on a Straight Line |
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Definition
| Indicates that the opportunity cost is constant because there is a one for one exchange for each available option. |
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Term
| 4 Factors that shift the Production Possibility Curve to the right |
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Definition
| Shifting PPC to the right indicates an increase in production ability. This can be due to: a) technology. b) increase in resources. c) increase in quality and/or quantity of population. d) capital formation (foregoing immediate consumption to devote resources to creation of capital goods that will increase productivity). |
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Term
| Factors that shift the Production Possibility Curve to the left. (4) |
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Definition
| Shift of the PPC to the left indicates a decrease in production ability. a) depletion of natural resources. b) population quality or quantity reduction. c) natural disasters. d) war. |
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Term
| Partial shift in Production Possibility Curve |
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Definition
| reflects an increase or decrease in ability to produce in less than all sectors represented by the PPC. |
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Term
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Definition
| the formula used to indicate the length of time necessary to double principal based on interest rate earned. divide 72 by rate to get number of years to double principal. Years to Double Pricipal=72/rate. 100 will double at 3% interest in _____ years. (24 years) |
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Term
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Definition
| using the least resources possible to produce a given level of output |
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Term
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Definition
| applying resources to produce goods or services that society's members value most highly. |
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Term
| What is the difference between Technical and Economic Efficiency |
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Definition
| Technical Efficiency reflects the most effienct use of the 4 key limited resources, but doesn't reflect if the model efficiently meets the needs/desires of society (economic efficiency). |
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Term
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Definition
| A change in resource allocation between two or more producers that makes those involved in one activity better off without making those involved in another activity worse off. This doesn't mean that everyone has to be better off, only that gains should exceed losses. |
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Term
| _______ is the fundamental economic problem that human wants exceed the availability of time, goods, and resources. |
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Definition
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Term
| ________ is the study of how individuals and society choose to allocate scarce resources to satifsy unlimited wants. |
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Definition
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Term
| Factors of production classified as: land, labor, and captial are also called ________. |
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Definition
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Term
| ___________ applies an economy wide perspective which focuses on such issues as inflation, unemployment, and the growth rate of the economy. |
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Definition
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Term
| _________ examins small units of an economy, analyzing individual markets such as the market for personal computers. |
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Definition
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Term
| A simplified description of reality used to understand and predict economic events is called a (an)________. |
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Definition
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Term
| If the ________ assumption is violated, a model cannot be tested. |
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Definition
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Term
| _________ uses testable statements. |
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Definition
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Term
| _______ is a shorthand expression for any natural resource provided by nature |
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Definition
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Term
| The physical plants, machinery, and equipment used to produce other goods is ________. |
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Definition
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Term
| The mental and physical capacity of workers to produce goods and services is _______. |
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Definition
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Term
| ______ is the creative ability of individuals to seek profits by combining resources to produce innovative products. |
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Definition
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Term
| _______ is an analysis based on value judgment |
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Definition
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Term
The condition of scarcity:
a) cannot be eliminated
b) prevails in poor economies
c)Prevails in rich economies.
d) All of the above.
e) None of the above. |
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Definition
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Term
The condition of scarcity can be eliminated if:
c) people satisfy needs rather than false wants.
b) sufficient new resources were discovered.
a) output of goods and services were increased.
d) none of the above. |
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Definition
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Term
Which of the following is not a factor of production?
a) a computer chip
b) the service of a lawyer
c) dollars
d) all of the above are factors of production
e) none of the above are factors of production |
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Definition
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Term
| A textbook is an example of a) capital b) a natural resource c) labor d) non of the above |
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Definition
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Term
The subject of economies is primarily the study of:
a) the government decision-making process
b) how to operate a business successfully
c) decision-making because of the problem of scarcity
d) how to make money in the stock market. |
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Definition
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Term
Which of the following is included in the study of macroeconomics?
a) salaries of college professors
b) computer prices
c) unemployment in the nation
d) silver prices |
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Definition
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Term
Microeconomics approaches the study of economics from the viewpoint of:
a) individual or specific markets.
b) the national economy
c) government units
d) economywide markets. |
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Definition
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Term
| The definition of a model is a: a) description of all variables affecting a situation b) positive analysis of all variables affecting an event. c) simplified description of reality to understand and predict an economic event. d) data adjusted for rational action. |
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Definition
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Term
Which of the following is a positive statement?
a) I think we should pass a constitutional amendment to reduce the deficit.
b) President Clinton's way of dealing with the economy is better than President Bush's.
c) I hope interest rates come down soon.
d) if taxes are raised, unemployment will drop |
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Definition
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Term
An increase in the federal minimum wage will provide a living wage for the working poor is a:
a) statement of positive economics.
b) fallacy of composition.
c) tautology.
d) statement of normative economics. |
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Definition
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Term
Select the normative statement that completes the following sentence: If the minimum wage is raised:
a) cost per unit of output will rise.
b) workers will gain their rightful share of total income.
c) the rate of inflation will rise.
d) profits will fall. |
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Definition
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Term
The government should provide health care for all citizens." This statement is an illustration of:
a) positive economic analysis.
b) correlation analysis.
c) fallacy of association analysis.
d) normative economic analysis. |
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Definition
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Term
The software programs that make computer hardware useful in production and management tasks are:
a) capital
b) labor
c) a natural resource
d) none of the above. |
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Definition
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Term
The federal minimum wage causes higher unemployment among teenagers" is a:
a) statement of positive economics.
b) statement of normative economics
c) testable value judgement
d) fallacy of composition |
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Definition
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Term
All human wants cannont be satisified because of the problem of scarcity.
T or F |
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Definition
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Term
Economics is the study of people's making choices faced with the problem of unlimited wants and limited resources.
T or F |
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Definition
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Term
Policies to determine the price of troll dolls are a concern of macroeconomics.
T or F |
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Definition
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Term
Policies to increase the supply of money in the economy are primarily a concern of microeconomics.
T or F |
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Definition
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Term
The statement "A tax hike for the rich is the fairest way to raise tax collections" is an example of positive economic analysis.
T or F |
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Definition
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Term
| The statement "It would be better to put up with price controls than to have continuing higher medical care prices" is an example of normative economic analysis. T or F |
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Definition
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Term
The statement "cutting government spending is the best way to boost consumer confidence" is an example of normative economics.
T or F |
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Definition
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Term
The statement "American workers are lazy" is an example of positive economic analysis.
T or F |
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Definition
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Term
| An individual that seeks profits by combining resources to produce innovative products |
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Definition
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Term
| The basic categories of inputs used to produce goods and services |
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Definition
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Term
| The mental and physical capacity of workers to produce |
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Definition
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Term
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Definition
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Term
| Man-made goods used to produce other goods |
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Definition
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Term
| _________ economics is an analysis limited to satements that are verifable by reference to facts. |
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Definition
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Term
| A phrase that means that while certain veriable change, "all other things remain unchanged or constant." |
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Definition
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Term
| The study of how society chooses to allocate its scare resources to satifsy unlimited wants. |
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Definition
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Term
| _________ economics is an analysis based on value judgement which cannont be proven by facts. |
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Definition
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Term
| The condition that human wants are forever great than supply |
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Definition
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Term
| A simplified description of reality |
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Definition
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Term
| The ________ (a) problem concerns the division of output amont society's citizens. The ______ (b) question ask exactly which goods are to be produced and in what quantities. The ______ (c) question requires society to decide the resource mix used to produce goods. |
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Definition
(a) for whom
(b) what
(c) how |
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Term
| __________ is the best alternative foregone for a chosen option |
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Definition
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Term
| The basic approach that compares additional benefits of a change against the additional costs of the change is called _______ |
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Definition
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Term
| The ________ represents the maximum possible combinations of two outputs that can be produced in a given period of time. Inefficient production occurs at any point inside the curve and all points along the curve are efficient points. |
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Definition
| Production Possibility Curve (PPC) |
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Term
| The ________ states that the opportunity cost increases as production of an output expands. |
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Definition
| Law of Increasing Opportunity Cost. |
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Term
| ________ occurs when the production possibilities curve shifts outward as the result of changes in the resource base or advance in technology. |
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Definition
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Term
| Factories, equipment, and inventories produced in the present are called _____ which can be used to shift the production possibilities curve outwarde in the future. |
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Definition
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Term
| The body of knowledge and skills applied to how goods are produced is ______. |
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Definition
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Term
| Which of the following does not illustrate opportunity cost? (a) if I study, I must give up going to the football game. (b) if I buy a computer, I must do without a 35" television. c) More consumer spending now means more spending in the future. d) If I spend more on clothes, I must spend less on food. |
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Definition
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Term
| The accumulation of capital is known as _______. |
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Definition
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Term
| The basic economic question of which resources to use in production |
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Definition
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Term
| The basic economic question of which goods and services to produce |
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Definition
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Term
| The best alternative sacrificed |
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Definition
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Term
| The application of knowledge to production |
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Definition
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Term
| An outward shift of the production possibilities curve |
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Definition
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Term
| The ______ possibilities curve shows the maximum combinations of two outputs that an economy can produce, given its available resources and technology. |
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Definition
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Term
| The basic economic question of who receives goods and services |
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Definition
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Term
| _______ analysis means additions to or subtractions from a current situation. |
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Definition
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Term
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Definition
| study of the efficient allocation of limited resources amont the unlimited wants. |
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Term
|
Definition
| labor, land (including all natural resources), captial (not money)(man made goods used to produce something else), Entrepreneurial skills |
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Term
| Average rate of annual economic growth in US over last 60 years. |
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Definition
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Term
| Economic Growth expressed by |
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Definition
| GDP (Gross Domestic Product) |
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Term
| formula used to determine rate of growth |
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Definition
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Term
| What is major driver of economic growth |
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Definition
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Term
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Definition
|
|
Term
| y=f(x) which is dependent, which is independent |
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Definition
| y is dependent, x is independent |
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Term
| express how exconomic growth relies on captial with a functional notation |
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Definition
| economic growth = f(capital) |
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Term
| Positive relationship - define |
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Definition
| when two items with a functional relationship move in the same direction, if one increases the other increases or vis-versa. |
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Term
| Positive relationship - aka |
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Definition
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Term
| Negative relationship - define |
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Definition
| when two dependent items react oppositely of each other. If one goes up the other goes down (increase/decrease) |
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Term
| Negative relationship - another term |
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Definition
|
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Term
|
Definition
| innovators, risk takers, experienced, educated, managers, COO, CEO, CFO |
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Term
relationship between risk and reward is:
(a) direct (b) indirect |
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Definition
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Term
| Formula needed to calculate future value with rate, time and principle |
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Definition
FV=PV(1+R) to the power of N
Future Value=Present Valuex(1+rate) to the power to time units. |
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Term
|
Definition
| limits to economics resources |
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Term
|
Definition
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Term
|
Definition
| all human made goods used to make more consumer or capital goods. |
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Term
|
Definition
| skills of creating, managing human and other resources to provide desired goods and services at a profit. |
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Term
|
Definition
| limits to 4 key resources |
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Term
|
Definition
|
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Term
|
Definition
| concerned with household, firms and government |
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Term
|
Definition
| overall view of the economy (aggregate level of national output of goods and services. |
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Term
| Economic Models - must meet 3 requirements: |
|
Definition
1. simplify reality
2. predict future events precisely.
3. predictions can be validated. |
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Term
|
Definition
| assumption all other variables remain unchanged. |
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Term
|
Definition
| fact without opinion/judgement |
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Term
|
Definition
| opinion/judgement (may include positive statement) |
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Term
|
Definition
| false thinking that because A precedes B, then B must be caused by A. |
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Term
|
Definition
| posing a cure or identifying a cause without proper testing |
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Term
|
Definition
| return on investment after inflation has been taken into account. |
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Term
|
Definition
|
|
Term
| formula that shows profit |
|
Definition
| profit = revenues-expenses. |
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Term
|
Definition
| responsivness of consumer |
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Term
| 3 basic Economic Questions |
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Definition
|
|
Term
| increase in demand will ________ equilibrium price and ________ equilibrium quantity. |
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Definition
|
|
Term
| increase in demand can be due to: 5 factors |
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Definition
| 1. price of other goods. 2. increase in population. 3. changes in taste. 4. increase in income. 5. changes in expectations. |
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Term
|
Definition
| a change from one point to another along one demand curve. Either decreases or increases Quantity demanded. Can only be effected by change in price per unit. |
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Term
| Increase in price per unit will decrease __________ |
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Definition
|
|
Term
| Increase in quantity demanded is caused by |
|
Definition
| decrease in price per unit |
|
|
Term
| decrease in quantity demanded |
|
Definition
| reflects increase in price per unit |
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Term
| Decrease in price per unit will cause |
|
Definition
| increase in quantity demanded. |
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Term
| price per unit and quantity demanded have a _______ relationship. |
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Definition
| indirect, inverse or negative relationship. |
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Term
|
Definition
|
|
Term
|
Definition
| assuming ceteris paribus (all things constant except price) more goods will be purchased at lower prices or fewer goods will be purchased at higher prices. When prices goes down, we buy more; when price goes up we buy less. |
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Term
| Factors that remain constant during price change (5) |
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Definition
| size of the population 2)consumer's incomes 3) tastes 4) epectations 5) price of other goods on the market. |
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Term
|
Definition
| list of different quantities of a product or service that a person is willing and able to buy at different prices over a specified period of time, assuming ceteris paribus (all other things constant). |
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Term
| substitute goods (define) |
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Definition
| goods that have similar use and give nearly similar satisfaction |
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Term
|
Definition
| a product for which demand increases with an increase in population income. |
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Term
|
Definition
| a product for which demand increases with a decrease in population income. (99cents only stores) |
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Term
| Change in quantity demanded (define) |
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Definition
| a move along the Demand curve caused by price of the product. |
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Term
| Change in Demand Curve (shift right or left) demand |
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Definition
| Anything that effects a shift in the entire demand curve caused by anything that effects your willingness to buy other than price of the product. |
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Term
|
Definition
| the accumulation of capital |
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Term
| The Law of Diminishing Marginal Utility |
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Definition
| The more of a product that is consumed, the less satisfication (utility) the consumer will derive. Therefore, in order to sell more of a product, the price of the good has to progressively decrease as utility (satisfaction) decreases. |
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Term
|
Definition
| list of the different quantities of a product or service that a person is willing and bale to buy at different prices over a specified period of time while keeping all other factors constant. ceteris parubis |
|
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Term
| Three reasons why Demand Curve slopes downward |
|
Definition
| 1) substituttion effect. 2) Real income effect 3) The Law of Diminishing Marginal Utility. |
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Term
|
Definition
| when the price of one product goes up people will buy another product or service that is similar in use and that gives nearly the same satisfaction as the first product. |
|
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Term
|
Definition
| when prices drop, consumers enjoy a savings which translates to increased buying power or income. |
|
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Term
| How do you calculate a market demand curve? |
|
Definition
| add together all quantities demanded at each price (horizontal summation). Add tables across (total derived is point on graph at that price). |
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Term
|
Definition
| the study of Supply and Demand. |
|
|
Term
| Quantity supplied > Quantity demanded |
|
Definition
|
|
Term
| Quantity demanded > Quantity supplied |
|
Definition
|
|
Term
| Quantity demanded = Quantity supplied |
|
Definition
|
|
Term
|
Definition
|
|
Term
|
Definition
|
|
Term
|
Definition
| The price at which the willingness to buy and the willingness to supply meet and the market is cleared or all buyers get a product and all products are sold. |
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Term
| Change in quantity demanded |
|
Definition
|
|
Term
|
Definition
| effect by anything but price. |
|
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Term
| Factors that determine demand (5) |
|
Definition
| Income (normal goods income has direct relationship, inferior goods and income have an inverse relationship), taste and preference, price of other goods (substitute goods and an inverse relationship with each other, complementary goods have a direct relationship with each other), consumer expectations and population. |
|
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Term
| difference between changes in quantity supplies and Supply. |
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Definition
| Quantity supplied effected by price only, Supply effected by all other things. |
|
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Term
| Which way does the Demand curve slope |
|
Definition
|
|
Term
| which way does the supply curve slope |
|
Definition
|
|
Term
| Factors that determine supply (8) |
|
Definition
| Technology. 2)price of inputs. 3) price of other goods. 4. Size and number of firms. 5) producer expectations. 6. Taxes (per unit). 7. Subsidies (per unit). 8. Government law. |
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Term
| Technology as it determines Supply |
|
Definition
| increases in technology allow the more effiecient use of other resources at all price levels, thereby shifting the supply curve to the right. The inverse can be true with the loss of technology. |
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Term
| Price of inputs as it determines Supply |
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Definition
| aka factors of production. Inputs or factors of production are the resources needed to produce, therefore the increase or decrease in price of a given input will directly determine the price of production at all price levels or will shift the Supply curve right or left. |
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Term
| Price of other goods as they determine Supply |
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Definition
| substitutes of production are goods that can be produced with the same resources (inputs). If the price of one good increases more inputs will be devoted to creating that good, thereby reducing the amount of resources devoted to product of the substitute good. complements in production: goods for which increase in production of one leads to increase in production of another. If cereal become more popular, the cost will go up, price of corn will go up, cost of ethanol will go up because corn costs more. |
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Term
| Size and number of firms as it pertains to determining Supply |
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Definition
| if only one firm, then a monopoly they will limit supply in order to raise prices, many firms they will increase supply. |
|
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Term
| Producer's expectations as it determines Supply. |
|
Definition
| If producers expect high demand they will produce more, if they expect low demand they will produce less. |
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Term
| Taxes (per unit) as they determine Supply. |
|
Definition
| An increase in cost (taxes) will shift the supply curve to the left, reducing supply. opposite is also true. |
|
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Term
| Subsidies (per unit) as they determine Supply. |
|
Definition
| subsidies reduce the cost per unit of a good, thereby encouraging producers to supply more. |
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Term
| Gpverm,emt ;aws as tjeu determine supply. |
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Definition
| a) licenses limits the number of producers thereby decreasing Supply (see # of firms). b) Import quotas aslo limit the number of producers - see a |
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Term
| Substitutes in Production change the equiilibrium qunatity in ______ direction |
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Definition
|
|
Term
| Complements in Production change the Equilibrium Price _______ direction. |
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Definition
|
|
Term
| Laws of Supply and Demand 4 basic situtations: |
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Definition
| 1) Increase in Demand. 2) Decrease in Demand. 3) Increase in Supply. 4) Decrease in Supply. |
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Term
| Increase in Demand as it applies to Supply and Demand |
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Definition
| Increase in Demand is always accompanied by an increase in the equilibrium price and equilibrium quantity. |
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Term
| Decrease in Demand as it effects Supply and Demand |
|
Definition
| Any decrease in demand is always accompaniedby a decrease in equilibrium price and equilibrium quantity. |
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Term
| Increase in Supply as it effects Supply and Demand |
|
Definition
| Increase in Supply = decrease in equilibrium price and increase in the equilibrium quantity. |
|
|
Term
| Decrease in Supply as it effects Supply and Demand: |
|
Definition
| decrease in supply = increase in equilibrium price and decrease in equilibrium quantity. |
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Term
| Increase in Supply and Demand |
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Definition
| when consumers wants something, but other increases (say in technology) make it cheaper to produce: even though demand should set a higher equilibrium price, the lower cost to produce due to other factors wants to set a lower equilibrium price. Three possibilities: 1) if Supply and Demand increase equally, equilibrium price stays the same. 2) if demand increases more than supply then the equilibrium price will increase. 3) if supply increases more than demand then the equilibrium price will decrease. Only sure thing is that equilibrium quantity will increase. Equilibrium price is indeterminate. |
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Term
| What will Equilibrium Price do when Supply and Demand both increase or decrease similtaneously? |
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Definition
| It is indeterminate. it can stay the same, increase or decrease depending on the amount of decrease or increase of each of supply and demand. |
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Term
| What will happen to equilibrium quantity when Supply and Demand both increase. |
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Definition
|
|
Term
| What is the only outcome we can be sure of with increasing Supply and Demand |
|
Definition
| that Equilibrium Quantity will increase. Equilibrium Price is indeterminate without specific info on the increase of Supply and Demand. |
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|
Term
| Increase in Demand, Decrease in Supply |
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Definition
| Equilibrium Price will increase, but Equilibrium Quantity will be indeterminate. |
|
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Term
| Decrease in Supply and Demand |
|
Definition
| Equilibrium quantity will decrease, but Equilibrium Price is indeterminate. |
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Term
| Decrease in Demand, increase in Supply |
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Definition
| Equilibrium Price will decrease, but Equilibrium Quantity will be indeterminate. |
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Term
| Price ceilings, - maximum price |
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Definition
| (such as rent control): price is deliberately set below the equilibrium. Result in shortages. |
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Term
|
Definition
| when price of product is legally set below the equilibrium price, some consumers may be willing to pay a higer price than legal. This is the existence of a 'black market'. |
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Term
| Determining black market price: |
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Definition
| draw a horizontal line from the legally set price to the supply curve. from this point, draw a vertical line to the demand curve. from this point draw an horizontal line to the y axis. |
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Term
| Price Floor (minimum price) |
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Definition
| governments set minimum prices for goods so that producers can improve their income. Prices can go higher but not lower. |
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Term
| When a price floor or ceiling are removed what happens to price of goods or service? |
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Definition
| price will return to equilibrium price. |
|
|
Term
| when the government intervenes in the economy by shifting either supply or demand what is it called? |
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Definition
| the government is "working throug the market". |
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Term
|
Definition
| the graphical interpretation of the condition set when high prices prompt increase in production which then prompts decrease in prices which then prompts dcrease in production which increases prices, which increases production and so on. |
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Term
| on the Supply and Demand graph, the units supplied will be expressed by ______. |
|
Definition
| The equilibrium point at which the Supply and Demand curve meet. |
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|
Term
| On the Supply and Demand graph the amount of goods produced at a particular price point which is greater than or equal to the equilibrium Price is expressed by _______ |
|
Definition
| The point at which the horizontal line drawn from the price intersects with the Supply Curve or the horizontal line drawn from that point (called the equilibrium point) to the x axis. |
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Term
| Study how to page 78 of text book |
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Definition
|
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Term
|
Definition
| Generalizing from personal experience |
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Term
|
Definition
| a place where one can buy and sell a product and negotiate a price. |
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Term
|
Definition
| greek origins, skilled in household management |
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|
Term
| another way to say resources (generalized) |
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Definition
|
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Term
|
Definition
| skills of creating and managing human and other resources to make a profit. risk takes |
|
|
Term
| Reward for using Land to produce goods and services is |
|
Definition
|
|
Term
| reward for using labor to produce goods and services is |
|
Definition
|
|
Term
| reward for using capital to produce goods and services is |
|
Definition
|
|
Term
| Reward for using Entrepreneurial skills to produce goods and services is |
|
Definition
|
|
Term
|
Definition
| all other variables remain unchanged or equal. |
|
|
Term
|
Definition
| of various explanations choose the simplest (in econ - get rid of all but the most important factors). |
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Term
| The Fallacy of Composition (define) |
|
Definition
| what is good for one person is good for all such as standing up at a ball game is good for one, but may not improve view if everyone did it. |
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|
Term
| The Post Hoc Fallacy (define) |
|
Definition
| after this, therefore because of this. thinking because event A precedes event B, then event A caused event B. |
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Term
|
Definition
| proposing a cure for a problem without propert testing, such as Reagan era tax cut meant to encourage savings, instead public spent the money. aka jumping to conclusion about cause and effect simply because two events occur in temporal succession. |
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Term
| Difficulty in Predicting Human Behavior (define how a problem with Econ) |
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Definition
| can conduct lab experiments in which all variables can be controled, can only try to predict average behavior of a population. |
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|
Term
| Independent variables are also called |
|
Definition
|
|
Term
| Dependent variables are also called |
|
Definition
|
|
Term
| decrease in supply, ceteris paribus = ________ in the equilibrium quantity sold and a ______ in the equilibrium price. |
|
Definition
|
|
Term
| price elasticity of Demand (define) |
|
Definition
| the relative change in quantity demanded due to a relative change in price. |
|
|
Term
| Formula to determine Price Elasticity of Demand |
|
Definition
Ed= % change Qd / # change Pd or
(Q1-Q2/.5(Q1+Q2))/(P1-P2/.5(P1+P2)) |
|
|
Term
| perfect inelasticity (define) |
|
Definition
| elasticity equal to zero. Demand curve is perfectly verticle. |
|
|
Term
| relative inelasticity (define) |
|
Definition
| elasticity between zero and one |
|
|
Term
| unitary elasticity (define) |
|
Definition
|
|
Term
| relative elasticity (define) |
|
Definition
| 1 < elasticity > infinity |
|
|
Term
| perfect elasticity (define) |
|
Definition
| elasticity equal to infinity. Demand curve is perfectly horizontal. |
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|
Term
| The steeper a demand curve the more _____ it is. |
|
Definition
|
|
Term
| The flatter a demand curve the more ______ it is. |
|
Definition
|
|
Term
| 3 factors that influence price elasticity of demand |
|
Definition
| substitute goods, disposable income spent on the particular good and the duration of the price change. |
|
|
Term
| If demand is elastic, then a price increase will ______ Total Revenue |
|
Definition
|
|
Term
| If demand is inelastic, a price increase will ________ total revenue |
|
Definition
|
|
Term
| formual for Total Revenue is |
|
Definition
|
|
Term
| If a 1% change in price causes less than a 1% change in quantity demanded then demand is __________ |
|
Definition
| inelastic and the price change will cause an increase in the TR. |
|
|
Term
| price increase when Ed is inelastic, then TR will ________ |
|
Definition
|
|
Term
| Price (P) and Total Revenue (TR) have a positive relationship when Ed is |
|
Definition
|
|
Term
| Price (P) and Total Revenue (TR) have a negative relationship when Ed is _______ |
|
Definition
|
|
Term
| If a greater than 1% change in price = a greater than 1% change in quantity demanded, then demand is |
|
Definition
| elastic and will cause a decrease in total revenues (TR) |
|
|
Term
| find out how to calculate the total increase or decrease in revenue and quantity demanded by using the Ed and TR formulas |
|
Definition
|
|
Term
| A 1% increase in price = a 1% change in quantity demanded (Qd) it is ______ |
|
Definition
| unitary elastic and a price change does not change total revenue. (should lower prices to garner 'goodwill'). |
|
|
Term
| If the Ed of a good is unitary elastic or unit elastic, one should ________ |
|
Definition
| lower the price, because it will not effect your total revenue and you will garner goodwill, thereby gaining a larger market share. |
|
|
Term
| Income elasticity of demand (define) |
|
Definition
| describes the percentage change in quanity demanded due to a percentage change in consumer income. |
|
|
Term
| Income elasticity of demand (formula) |
|
Definition
| % change of quantity demanded/% change of income. |
|
|
Term
| The price elasticity of demand is always negative because of _______ |
|
Definition
|
|
Term
| The Law of Demand (define) |
|
Definition
| assuming all else besides price is constant (ceteris paribus0 more goods will be purchased at lower prices or fewer goods will be purchased at higher prices. When the price goes down we buy more, when it goes up we buy less. |
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|
Term
| The Income Elasticity of Demand can be ______ or ______ depending on the the type of product (good). |
|
Definition
|
|
Term
| The Income elasticity of demand is _____ for a normal good and _______ for an inferior good if income increase. |
|
Definition
|
|
Term
| The Income elasticity of demand is _____ for a normal good and _______ for an inferior good if income decreases. |
|
Definition
|
|
Term
| The Income Elasticity of Demand has a(n) ______ relationship with normal goods and a(n) _______ relationship with inferior goods. |
|
Definition
| direct/positive.......indirect/negative |
|
|
Term
| Cross Elasticity of Demand (define) |
|
Definition
| change of quantity demand of Good A due to a change of price for Good B. |
|
|
Term
| Cross Elasticity of Demand (formula, when goods to compare are A and B |
|
Definition
| % change of Quantity Demanded of A/% change of Price of B |
|
|
Term
| If Cross Elasticity of Demand is positive, then goods compared are _______ |
|
Definition
|
|
Term
| When Cross Elasticity of Demand is negative, then the goods being compared are _____ |
|
Definition
|
|
Term
| When the increase in Price of good A causes an increase in the Quantity Demanded of Good B, the goods are ______ |
|
Definition
| substitutes (or replace each other) |
|
|
Term
| When the increase in Price of good A increases and decreases the Quantity Demanded of Good B, the goods are ______ |
|
Definition
| complements (or are consumed together) |
|
|
Term
| substitute goods (define) |
|
Definition
|
|
Term
| complement goods (define) |
|
Definition
|
|
Term
|
Definition
| how a change in supply causes movement along a demand curve (or a change in Quanityt demanded). |
|
|
Term
| Movement along a demand curve (aka) |
|
Definition
|
|
Term
| Elasticity of Supply (formula) |
|
Definition
| Es=% change of Quanity Supplied/% change of Price |
|
|
Term
| Elasticity of Supply is always ______ decause of the Law of ______ |
|
Definition
|
|
Term
| Law of Supply - find definition |
|
Definition
|
|
Term
| If Elasticity of Supply is zero is is |
|
Definition
|
|
Term
| If the Elasticity of Supply = 1 |
|
Definition
|
|
Term
|
Definition
| Supply is relatively elastic |
|
|
Term
| Elasticity of Supply = infinity |
|
Definition
| Supply is perfectly elastic |
|
|
Term
| Perfectly inelastic (define) |
|
Definition
|
|
Term
| Perfectly elastic (define) |
|
Definition
|
|
Term
|
Definition
|
|
Term
|
Definition
|
|
Term
|
Definition
1% increase in price will lead to more than 1% decrease in Quantity Demanded
Increase in Price = Decrease in Total Revenue
Decrease in Price = Increase in Total Revenue |
|
|
Term
| Two things that effect Elasticity of Supply are _______ and _______ |
|
Definition
| technology used to produce the good and length of time during which the price change is in place. |
|
|
Term
| The longer the amount of time available the ______ elastic the Elasticity of Supply is for a good or service. |
|
Definition
|
|
Term
| Demand is perfectly elastic (define) |
|
Definition
| price elasticity = infinity, demand curve is horizontal at the market price, any change in supply only impacts quanity sold in equilibrium, equilibrium price does not change. |
|
|
Term
| Price elasticity of Demand = 0 (describe) |
|
Definition
| perfectly inelastic, demand curve is verticle, quantity demanded does not change with price, change in supply changes price and there is no change in quantity sold. |
|
|
Term
| Perfectly Elastic Supply Curve(describe) |
|
Definition
| perfectly horizontal at market price, changes in demand are only reflected in changes in quanity sold, price does not change. |
|
|
Term
| Perfectly Inelastic Supply Curbve (describe) |
|
Definition
| Supply Curve is verticle, quantity supplied is the same regardless of price, only change in demand (Quantity Demanded) influence market-clearing price. |
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