Economics Test Flashcards
Oligopoly
A market structure in which a small number of firms compete.
macroeconomics
The study of performance of the national economy and the global economy
microeconomics
The study of the choices that individuals and businesses make, the way choices interact in markets, and the influence of governments.
Self-Interest
A choice that you think is the best one available for you.
Example: Ordering mushroom pizza for yourself, even though no one else likes it
Social interest
A choice that leads to an outcome that is the best for society as a whole.
Has two dimensions: efficiency + equity
Perfect competition
a market in which there are many firms each selling an identical product with many buyers
Opportunity costs
the highest-value alternative that we must give up to get something
Production quota
an upper limit to the quantity of a good that may be produced in a specified period.
What is the law of supply?
Other things remaining the same, the higher the price of a good, the greater is the quantity supplied; and the lower the price of a good, the smaller is the quantity supplied.
Substitution Effect
The effect of a change in a price of a good or service on the quantity bought when the consumer (hypothetically) remains indifferent between the original and the new consumption situations
Six main factors bring changes in demand. What are they?
- The prices of related goods
- Expected future prices
- income
- Expected future income and credit
- population
- preferences
Six main factors bring changes in supply. What are they?
- The prices of factors of production
- The prices of related goods produced
- Expected future prices
- The number of suppliers
- Technology
- The state of nature
Comparative advantage
A person or country has a comparative advantage in an activity if that person or country can perform the activity at a lower opportunity cost than than anyone else or any other country.
