CH.1-4 Flashcards
The study of how people manage scarce resources
economics
study of how individuals and firms manage resources
microeconomics
study of the economy as a whole
macroeconomics
how policy makers manage growth/ behavior of the overall economy
macroeconomics
people make choices to achieve their goals in the most effective way with the resources they have
rational behavior
wanting more than we can get with available resources
scarcity
the true cost of your choices
opportunity cost
the value you could have gained by choosing your next best alternative
opportunity cost
a cost that has already been incurred and can’t be recovered
sunk costs
not only maximizing productivity but also ensuring that people get what they most want and need given the available resources
efficiency
consistent relationship
correlation
one variable causes another
causation
balance objective data with personal values and career aspirations
positive/ normative analysis
helps us understand how our activities interact and impact the broader economy
circular flow diagram
what are the assumptions of the PPF
only 2 choices are possible, fixed number of resources, fixed technology, full and efficient use of resources
what affects productivity
a shifting or reallocation of resources
point outside the graph is _______
unattainable
point inside the graph is ________
efficient
what is absolute advantage
being more productive than another
what is comparative advantage
if a person can perform an activity at a lower opportunity cost than another person
what is a market
buyers and sellers who trade a particular good or service
what is quantity demand
the amount of a good or service buyers are willing and able to purchase at a given price
what is the law of demand
the lower the price, the higher the quantity demanded (all things equal)
what is the demand schedule
shows the inverse relationship between price and amount purchased at each price
what axis is price on
vertical
what axis is quantity on
horizontal
what is change in quantity demanded
movement along the demand curve, only caused by a change in the price of a good
what are the demand shifters
consumer preferences, number of buyers, income, expectations, and prices of related goods
what happens when there is a change in any of the demand shifters
it will shift the entire demand curve
what are substitutes
2 goods a consumer might purchase in place of another
what are complements
goods that are purchased together
a decrease in supply will shift the graph _______
left
a increase in supply will shift the graph _______
right
what is equilibrium
where the supply curve and the demand curve intersect
what is the point of equilibrium
at this point consumers are willing to buy exactly what products are willing to sell
what is elasticity
measure of the responsiveness to a change in market condition
what is the price of elasticity demand
measures the magnitude of change in the quantity demanded from a change in price
what is the price of elasticity demand
describes the size in change in the quantity demanded of a good when its price changes
what is elastic
greater than 1% change in quantity demanded
what is inelastic
< 1% change in quantity demanded
what is unit elastic
equal % change in quantity demanded
what does a perfectly elastic graph look like
completely flat (horizontal)
what does a completely inelastic graph look like
completely vertical
what are the determinants of elasticity
availability of substitutes, degree of necessity, cost of relative income, adjustment time, and scope of the market
what is total revenue
the amount that a firm recieves from the sale of goods/ services
what is the total revenue formula
TR= P x Q
increases in available resources _______ the entire frontier _______
shifts, outward
improvement in technology for one good ________ the frontier ________
rotates, outward
