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1ST EXAM TERMS Flashcards

highlighted words

1
Q

economics

A

study of how people manage resources

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2
Q

microeconomics

A

study of how individuals and firms manage resources

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3
Q

macroeconomics

A

study of the economy as a whole, and how policy-makers manage the growth and behavior of the overall economy

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4
Q

rational behavior

A

making choices to achieve goals in the most effective way possible

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5
Q

scarcity

A

the condition of wanting more than we can get with available resources

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6
Q

opportunity cost

A

the value to you of what you have to give up in order to get something; the value you could have gained by choosing the next-best alternative

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7
Q

marginal decision making

A

comparison of additional benefits of a choice against the additional costs it would bring, without considering related benefits and costs of past choices

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8
Q

sunk cost

A

a cost that has already been incurred and cannot be recovered or refunded

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9
Q

positive incentive

A

makes people more likely to do something

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10
Q

negative incentive

A

makes people less likely to do something

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11
Q

efficiency

A

use of resources to ensure that people get what they most want and need given the available resources

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12
Q

correlation

A

a consistently observed relationship between two variables

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13
Q

causation

A

a relationship between two events in which one brings about the other

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14
Q

circular flow model

A

a simplified representation of how the economy’s transactions work together

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15
Q

positive statement

A

a factual claim about how the world actually works

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16
Q

normative statement

A

a claim about how the world should be

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17
Q

market economy

A

an economy in which private individuals, rather than a centralized planning authority, make the decisions

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18
Q

market

A

buyers and sellers who trade a particular good or service

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19
Q

competitive market

A

a market in which fully informed, price-taking buyers and sellers easily trade a standardized good or service

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20
Q

price taker

A

a buyer or seller who cannot affect the market price. In a perfectly competitive market, firms are price takers as a consequence of many sellers selling standardized goods

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21
Q

standardized good

A

a good for which any two units have the same features and are interchangeable

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22
Q

transaction costs

A

the costs incurred by buyer and seller in agreeing to and executing a sale of goods or services

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23
Q

quantity demanded

A

the amount of a particular good that buyers will purchase at a given price during a specified period

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24
Q

demand

A

describes how much of something people are willing and able to buy under certain circumstances

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25
law of demand
a fundamental characteristic of demand that states that, all else equal, quantity demanded rises as price falls
26
demand curve
a graph that shows the quantities of a particular good or service that consumers will demand at various prices
27
nonprice determinants of demand
consumer preferences, prices of related goods, income of consumers, expectations of future prices, number of buyers in the market
28
substitutes
goods that serve a similar-enough purpose that a consumer might purchase one in place of the other
29
complements
goods that are consumed together, so that purchasing one will make consumers more likely to purchase the other
30
normal goods
goods for which demand increases as income increases
31
inferior goods
goods for which demand decreases as income increases
32
shift in the demand curve
a change in nonprice determinant causes an increase/decrease in demand
33
movement along the demand curve
a change in price causes an increase/decrease in quantity demanded
34
quantity supplied
the amount of a particular good or service that producers will offer for sale at a given price during a specified period
35
supply
how much of a good or service producers will offer for sale under given circumstances
36
law of supply
a fundamental characteristic of supply that states that, all else equal, quantity supplied rises as price rises
37
supply curve
a graph that shows the quantities of a particular good or service that producers will supply at various prices
38
nonprice determinants of supply
prices of related goods, technology, prices of inputs, expectations, number of sellers
39
shift of the supply curve
change in nonprice determinant causes an increase/decrease in supply
40
movement along the supply curve
change in price causes an increase/decrease in quantity supplied
41
equilibrium
the situation in a market when the quantity supplied equals the quantity demanded; graphically, this convergence happens where the demand curve intersects the supply curve
41
42
equilibrium price
the price at which the quantity supplied equals the quantity demanded
43
equilibrium quantity
the quantity that is supplied and demanded at the equilibrium price
44
surplus
a situation in which the quantity of a good that is supplied is higher than the quantity demanded; difference between the price at which a buyer or seller would be willing to trade and the actual price
45
shortage
a situation in which the quantity of a good that is demanded is higher than the quantity supplied
46
elasticity
a measure of how much consumers and producers will respond to a change in market conditions
47
cross-price elasticity of demand
describes how much the demand curve shifts when the price of another good changes; % change in quantity of A demanded/% change in price of B
48
income elasticity of demand
measures how much the demand curve shifts when consumers' incomes change; % change in quantity demanded/% change in income
49
price elasticity of demand
the size of the change in the quantity demanded of a good or service when its price changes; % change in Q demanded/% change in P
50
more elastic
a small change in price causes a large change in the quantity demanded
51
more inelastic
consumers will buy approximately the same quantity, regardless of the price
52
determinants of price elasticity of demand
availability of substitutes, degree of necessity, cost relative to income, adjustment time, scope of the market
53
perfectly elastic demand
demand for which any increase in price will cause quantity demanded to drop to zero; represented by a perfectly horizontal line
54
perfectly inelastic demand
demand for which quantity demanded remains the same regardless of price; represented by a perfectly vertical line
55
elastic
demand that has an absolute value of elasticity greater than 1
56
inelastic
demand that has an absolute value of elasticity less than 1
57
unit-elastic
demand that has an absolute value of elasticity exactly equal to 1
58
quantity effect
a decrease in total revenue that results from selling fewer units of the good; when the quantity effect outweighs the price effect, a price increase will cause a drop in total revenue
59
price effect
an increase in total revenue that results from receiving a higher price for each unit sold; when price effect outweighs the quantity effect, a price increase will raise total revenue
60
price elasticity of supply
the size of the change in the quantity supplied of a good or service when its price changes; % change in quantity supplied/% change in price
61
determinants of price elasticity of supply
availability of inputs, flexibility of the production process, adjustment time
62
willingness to pay
the maximum price that a buyer would be willing to pay for a good or service
63
willingness to sell
the minimum price that a seller is willing to accept in exchange for a good or service
64
consumer surplus
the net benefit that a consumer receives from purchasing a good or service, measured by the difference between willingness to pay and the actual price
65
producer surplus
the net benefit that a producer receives from the sale of a good or service, measured by the difference between the producer’s willingness to sell and the actual price
66
total surplus
a measure of the combined benefits that everyone receives from participating in an exchange of goods or services
67
zero-sum game
a situation in which whenever one person gains, another loses an equal amount, such that the net value of any transaction is zero
68
efficient market
an arrangement such that no exchange can make anyone better off without someone becoming worse off
69
deadweight loss
a loss of total surplus that occurs because the quantity of a good that is bought and sold is below the market equilibrium quantity
70
reasons why government intervenes
changing the distribution of surplus, encouraging or discouraging consumption, correcting market failures
71
price control
a regulation that sets a maximum or minimum legal price for a particular good
71
price ceiling
a maximum legal price at which a good can be sold
72
price floor
a minimum legal price at which a good can be sold
73
does a tax on sellers affect supply?
yes, supply decreases
74
does a tax on sellers affect demand?
no, demand stays the same
75
how does a tax on sellers affect the market equilibrium?
the equilibrium price rises and quantity demanded falls
76
tax wedge
the difference between the price paid by buyers and the price received by sellers in the presence of a tax
77
does a tax on buyers affect the supply curve?
no, supply stays the same
78
does a tax on buyers affect the demand curve?
yes, demand decreases
79
how does a tax on buyers affect the market equilibrium?
the equilibrium price and quantity both fall
80
tax incidence
the relative tax burden borne by buyers and sellers
81
subsidy
a requirement that the government pay an extra amount to producers or consumers of a good
82
does a subsidy to sellers affect the supply curve?
yes, supply increases
83
does a subsidy to sellers affect the demand curve?
no, demand stays the same
84
how does a subsidy to sellers affect the market equilibrium?
the equilibrium price decreases and the equilibrium quantity increases
85
effects of a subsidy
equilibrium quantity increases, buyers pay less and sellers receive more for each unit sold, the government has to pay for the subsidy
86
game theory
the study of how people behave strategically under different circumstances
87
behaving strategically
acting to achieve a goal by anticipating the interplay between your own and others’ decisions
88
prisoners' dilemma
a game of strategy in which two people make rational choices that lead to a less-than-ideal result for both
89
dominant strategy
a strategy that is the best one for a player to follow no matter what strategy other players choose
90
nash equilbrium
an equilibrium reached when all players choose the best strategy they can, given the choices of all other players
91
commitment strategy
an agreement to submit to a penalty in the future for defecting from a given strategy
92
repeated game
a game that is played more than once
93
tit-for-tat
a strategy in which a player in a repeated game takes the same action that his or her opponent did in the preceding round
94
backward induction
the process of analyzing a problem in reverse, starting with the last choice, then the second-to-last choice, and so on, to determine the optimal strategy
95
first-mover advantage
benefit enjoyed by the player who chooses first and, as a result, gets a higher payoff than those who follow

ECON200 (3 decks)

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