Exam 1 Terms Flashcards
(40 cards)
(Marginal) Willingness to pay
the maximum price at or below which a consumer will definitely buy one unit of a product.
(Marginal) Cost
the cost added by producing one additional unit of a products or service.
Price
the quantity of. money for which one may buy or sell a commodity.
Quantity Demanded
the aggregate value of the goods or services demanded by consumers in a stated period of time. (depends on the price of goods or serviced in the market.)
Demand
a consumer’s desire to purchase goods and services and willingness to pay a price for a specific good or service.
Quantity Supplied
the amount of goods or services that suppliers will produce and sell at a given market price.
Competitive Equilibrium
a condition in which profit-maximizing producers and utility-maximizing consumers in competitive markets with freely determined prices arrive at an equilibrium price.
Price Control
government-mandated legal minimum or maximum prices set for specified goods.
Price Ceiling
keeps a price from rising above certain level (the ceiling), while a price floor keeps a price from falling below a certain level (the floor).
Price Floor
the lowest legal price that can be paid in a market for goods and services, labor, or financial capital.
Excess Demand (Shortage)
a situation in which the demand for a product or service exceeds its supply in a market.
Excess Supply (Surplus)
a situation in which the quantity of a good or service supplied is more than the quantity demanded, and the price is above the equilibrium level determined bu supply and demand.
Revenue
the income that a firm receives from the sale of a good or service to its customers.
Profit
the difference between the revenue received from the sale of an output and the costs of all inputs used, as well as any opportunity costs.
Marginal Analysis and Maximizing Profit
an examination of the additional benefits of an activity compared to the additional costs incurred by that same activity. used as a decision-making tool to help them maximize their potential profits.
Law of Demand
on of the most fundamental concepts in economics. states that quantity purchased varied inversely with price. (the higher the price, the lower the quantity demanded)
Supply
the total amount of a specific good or service that is available to consumers. can relate to the amount available at a specific price or the amount available across a range of prices if displayed on a graph.
Law of Supply
states that other factors remaining constant, price and quantity supplied of a good are directly related to each other. (when the price of a good rises, the supplier increases the supply in order to earn a profit because of higher prices)
Scarcity
the gap between limited- that is, scarce- resources and theoretically limitless wants. (requires people to make decisions about how to allocate resources efficiently, in order to satisfy basic needs and as many additional wants as possible)
Opportunity Cost
represent the potential benefits an individual, investor, or business misses out on when choosing one alternative over another.
Law of Diminishing Returns
states that if one input in the production of a commodity is increased while all other inputs are help fixed, a point will eventually be reached at which additions of the input yeild.
Budget Constraint
the boundary the opportunity set– all possible combinations of consumption that someone can afford given the prices of goods and the individual’s income. (measures the cost in terms of what must be given up in exchange)
Utility
the total satisfaction received from consuming a goods or service. (the economic utility of a good or service important to understand, because it directly influences the demand, and therefore price, of that good or service)
Marginal Utility
the additional satisfaction or benefit (utility) that a consumer derives from buying an additional unit of a commodity or service.
