Economics Chapters 1-5
Terms
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- ceteris paribus
- all other variables remain fixed
- economics
- the study of choice in scarcity
- marginal change
- a small, one-unit, change
- macroeconomics
- the study of the nation's economy as a whole
- microeconomics
- the study of choices made by households - gov't and their choices affect on markets
- normative economics
- analysis answering "What Ought to be?"
- positive economics
- analysis answering "What Is or what Will be?"
- scarcity
- resources are limited
- variable
- something that can take on different values
- long run
- long enough for a firm to change all of the factors of production, like build a new facility
- marginal benefit
- the extra benefit resulting from an increase in some activity
- marginal cost
- the additional cost resulting from an increase in some activity
- marginal product of labor
- the change in output from one additional worker
- norminal value
- the face value of money
- real value
- the value of money in terms of what it can buy
- opportunity cost
- what you sacrifice to get something
- short run
- a period of time when one or more factors is fixed, a firm cannot modify facility
- external cost
- a third party's cost
- external benefit
- a third party's benefit
- externality
- the effect of a transaction on a third party
- comparitive advantage
- the ability of one person or nation to produce a good at a lower opportunity cost
- absolute advantage
- the ability of one person or nation to produce a good at a lower absolute cost
- centrally planned economy
- gov't controls productions, goods, and distribution
- perfectly competitive market
- a market with a very large number of firms, so single firm affects market price
- demand schedule
- a table that shows the relationship between price and customer demand, ceteris paribus
- individual demand curve
- a curve that shows the relationship between price and single customer demand, ceteris paribus
- law of demand
- the higher the price, the smaller the quantity demanded, ceteris paribus
- change in quantity demanded
- change in demand resulting from change in PRICE
- substitution effect
- the change in consumption resulting from a change in the PRICE of one good relative to the PRICE of another good
- income effect
- the change in consumption resulting from a change in REAL INCOME
- market demand curve
- a curve showing the relationship between price and quantity demanded by ALL consumers together, ceteris paribus
- supply schedule
- a table of numbers that shows the relationship between price and quantity supplied, certeris paribus
- quantity supplied
- the amount of a good an individual girm or firms as a group are willing to sell
- change in quantity supplied
- a change in the quantity supplied resulting from a change in the PRICE of a good
- market supply curve
- a curve showing the relationship between PRICE and QUANTITY supplied by all producers together
- market equilibruim
- quantity demanded = quantity supplied, no pressure to change price
- excess demand
- consumers demand more than suppliers are willing to give
- change in demand
- change in demand caused by something OTHER THAN PRICE, represented by a graphical SHIFT
- normal good
- when income increases = demand increases
- substitutes
- two goods related in suh a way that an increase in PRICE for one increases DEMAND for the other
- complements
- increase in price of one good decreases demand for another
- inferior
- increase in income decreases demand
- change in supply
- change in supply resulting from something OTHER THAN PRICE, graphically represented by shift of supply curve
- price elasticity of demand
-
a measure of the responsiveness of QUANTITY demanded to changes in PRICE.
% Change in Quantity Demanded
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% Change in Price - price elasticity of supply
-
a measure of the responsiveness of the QUANTITY supplied to changes in PRICE.
% Change in Quantity Supplied
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% Change in Price - elastic demand
- price elasticity > 1
- inelastic demand
- price elasticity < 1
- unitary elastic
- price elasticity = 1
- perfectly inelastic demand
- price elasticity = 0
- perfectly elastic demand
- price elasticity = infinate
- income elasticity of demand
-
responsiveness of QUANTITY demanded to INCOME change
% Change Quantity Demanded
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% Change in Income - cross elasticity of demand
-
responsiveness of quantity DEMANDED to changes in the PRICE of a RELATED GOOD.
% Change Quantity Demanded
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% Change Price Related Good - perfectly inelastic supply
- price elasticity of supply = 0
- perfectly elastic supply
- price elasticity of supply = infinate
- price-change formula
- shows percentage change in EQUILIBRUIM PRICE resulting from a change in DEMAND or SUPPLY,given values for the price elasticity of supply and the price elasticity of demand.
- midpoint method
-
Change in variable
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Average value of variable