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ECON 528 > Glossary > Flashcards

Glossary Flashcards

1
Q

The study of the economy as system in which feedbacks among sectors determine national output, employment and prices.

A

Macroeconomics

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2
Q

The study of individual behavior in the context of scarcity.

A

Microeconomics

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3
Q

Goods and services are supplied both by private suppliers and government.

A

Mixed Economies

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4
Q

A formalization of theory that facilitates scientific inquiry.

A

Model

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5
Q

A logical view of how things work, and is frequently formulated on the basis of observation.

A

Theory

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6
Q

What must be sacrificed when a choice is made.

A

Opportunity Cost

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7
Q

The quantity of a good or service that buyers wish to purchase at each possible price, with all other influences on demand remaining unchanged.

A

Demand

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8
Q

The quantity of a good or service that sellers are willing to sell at each possible price, with all other influences on supply remaining unchanged.

A

Supply

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9
Q

The amount purchased at a particular price.

A

Quantity demanded

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10
Q

The amount supplied at a particular price.

A

Quantity supplied

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11
Q

Other things being equal.

A

Ceteris paribus

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12
Q

The price at which quantity demanded equals the quantity supplied.

A

Equilibrium price

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13
Q

When the quantity supplied exceeds the quantity demanded at the going price.

A

Excess supply

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14
Q

When the quantity demanded exceeds the quantity supplied at the going price.

A

Excess demand

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15
Q

Determines outcomes at prices other than the equilibrium.

A

Short side of the market

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16
Q

Graphical expression of the relationship between price and quantity demanded, with other influences remaining unchanged.

A

Demand curve

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17
Q

Graphical expression of the relationship between price and quantity supplied, with other influences remaining unchanged.

A

Supply curve

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18
Q

When a price reduction (rise) for a related product reduces (increases) the demand for a primary product, it is this type of good for the primary product.

A

Substitute goods

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19
Q

When a price reduction (rise) for a related product increases (reduces) the demand fora primary product, it is this type of good for the primary product.

A

Complementary goods

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20
Q

One whose demand falls in response to higher incomes.

A

Inferior good

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21
Q

One whose demand increases in response to higher incomes.

A

Normal good

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22
Q

It is easier to communicate if equipment is compatible, and it costs less to maintain infrastructure where the variety is less.

A

Network economies

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23
Q

Compares an initial equilibrium with a new equilibrium, where the difference is due a change in one of the other things that lie behind the demand curve or the supply curve.

A

Comparative static analysis

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24
Q

The difference between revenues and actual explicit costs incurred.

A

Accounting profits.

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25
Q

Occurs when incomplete or asymmetric information describes an economic relationship.

A

Adverse selection.

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26
Q

Where at least one party in an economic relationship has less than full information and has a different amount of information from another party.

A

Asymmetric information.

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27
Q

The total fixed cost per unit of output.

A

Average fixed cost.

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28
Q

The price per unit sold.

A

Average revenue.

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29
Q

The sum of all costs per unit of output.

A

Average total cost (ATC).

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30
Q

The total variable cost per unit of output.

A

Average variable cost (AVC).

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31
Q

The buildings, machinery, equipment, and software used in producing goods and services comprise the firm’s capital.

A

Capital.

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32
Q

A measurable concept of satisfaction.

A

Cardinal utility.

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33
Q

Compares an initial equilibrium with a new equilibrium, where the difference is due to a change in one of the other things that lie behind the demand curve or the supply curve.

A

Comparative static analysis.

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34
Q

When a price reduction (rise) for a related product increases (reduces) the demand for a primary product, it is this type of good for the primary product.

A

Complementary goods.

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35
Q

Occurs when marginal utility per dollar spent on the last unit of each good is equal.

A

Consumer equilibrium.

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36
Q

An organization with a legal identity separate from its owners that produces and trades.

A

Corporation or company.

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37
Q

The percentage change in the quantity demanded divided by the percentage change in price.

A

Price elasticity of demand.

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38
Q

The quantity of a good or service that buyers wish to purchase at each possible price, with all other influences on demand remaining unchanged.

A

Demand.

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39
Q

Graphical expression of the relationship between price and quantity demanded, with other influences remaining unchanged.

A

Demand curve.

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40
Q

If the price elasticity is greater than unity.

A

Demand is elastic.

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41
Q

It implies that the addition to total utility from each extra unit of a good or service consumed is declining.

A

Diminishing marginal utility.

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42
Q

Those profits measured as the difference between total revenue and total costs where the cost term includes the opportunity cost of the resources used in production.

A

Economic profits.

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43
Q

]The percentage change in quantity supplied divided by the percentage change in price.

A

Elasticity of supply.

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44
Q

It is the price at which quantity demanded equals the quantity supplied; it equilibrates the market.

A

Equilibrium price.

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45
Q

Excess demand exists when the quantity demanded exceeds quantity supplied at the going price.

A

Excess demand (shortage).

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46
Q

Exists when the quantity supplied exceeds the quantity demanded at the going price.

A

Excess supply (surplus).

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47
Q

Fixed costs are costs that are independent of the level of output.

A

Fixed costs.

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48
Q

Income elasticity of demand is the percentage change in quantity demanded divided by a percentage change in income.

A

Income elasticity of demand.

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49
Q

An inferior good is one whose demand falls in response to higher incomes. Inferior goods have a negative income elasticity.

A

Inferior good.

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50
Q

Law of demand states that, all other things being equal, more of a good is demanded the lower its price is.

A

Law of demand.

51
Q

When increments of a variable factor (labor) are added to a fixed amount of another factor (capital), the marginal product of the variable factor must eventually decline.

A

Law of diminishing marginal product.

52
Q

A period of time that is sufficient to enable all factors of production to be adjusted.

A

Long run.

53
Q

Macroeconomics studies the economy as a system in which feedback among sectors determine national output, employment, and prices.

A

Macroeconomics.

54
Q

The cost of producing each additional unit of output.

A

Marginal cost of pruduction.

55
Q

The change in total revenue due to selling one more unit of a good.

A

Marginal revenue.

56
Q

It is the addition to total utility created when one more unit of a good or service is consumed.

A

Marginal utility.

57
Q

The horizontal sum of individual demands.

A

Market demand.

58
Q

It is the study of individual behavior in the context of scarcity.

A

Microeconomics.

59
Q

Normal good is one whose demand increases in response to higher incomes.

A

Normal good.

60
Q

Normal profits are required to induce suppliers to supply their goods and services. They reflect opportunity costs and can therefore be considered as a type of cost component. Normal profits are when economic profits equal zero.

A

Normal profits.

61
Q

Normative economics offers recommendations that incorporate value judgments.

A

Normative economics.

62
Q

Opportunity cost of a choice is what must be sacrificed when a choice is made.

A

Opportunity cost.

63
Q

Ordinal utility assumes that individuals can rank commodity bundles in accordance with the level of satisfaction associated with each bundle.

A

Ordinal utility.

64
Q

A business owned jointly by two or more individuals who share in the profits and are jointly responsible for losses.

A

Partnership.

65
Q

The elasticity computed at a particular point on the demand curve.

A

Point elasticity of demand.

66
Q

Studies objective or scientific explanations of how the economy functions.

A

Positive economics.

67
Q

The sum of each year’s earnings divided by one plus the interest rate raised to the appropriate power.

A

Present value of a stream of future earnings.

68
Q

Government rules or laws that inhibit the formation of market-determined prices.

A

Price controls.

69
Q

Measured as the percentage change in quantity demanded, divided by the percentage change in price.

A

Price elasticity of demand.

70
Q

A technological relationship that specifies how much output can be produced with specific amounts of inputs economics.

A

Production function.

71
Q

It is the goal of proprietary firms – they seek to maximize the difference between revenues and costs.

A

Profit maximization.

72
Q

Defines the amount purchased at a particular price.

A

Quantity demanded.

73
Q

Refers to the amount supplied at a particular price.

A

Quantity supplied.

74
Q

Represents the average relationship between two variables in a scatter diagram.

A

Regression line.

75
Q

Shareholders invest in corporations and therefore are the owners. They have limited liability personally if the firm incurs losses.

A

Shareholders.

76
Q

A period during which at least one factor of production is fixed. If capital is fixed, then more output is produced by using additional labor.

A

Short run.

77
Q

Occurs when each firm maximizes profit by producing a quantity where marginal revenue equals marginal cost at or above average variable cost.

A

Short run equilibrium.

78
Q

The relationship between total output produced and the amount of labor used, for a given amount of capital.

A

Short run total product.

79
Q

A price below AVC causes a firm to shutdown in the short run.

A

Shutdown price.

80
Q

The single owner of a business and is responsible for all profits and losses.

A

Sole proprietor.

81
Q

When a price reduction (rise) for a related product reduces (increases) the demand for a primary product, it is a substitute for the primary product.

A

Substitute goods.

82
Q

The quantity of a good or service that sellers are willing to sell at each possible price, with all other influences on supply remaining unchanged.

A

Supply.

83
Q

A graphical expression of the relationship between price and quantity supplied, with other influences remaining unchanged.

A

Supply curve.

84
Q

Describes how the burden of a tax is shared between buyer and seller.

A

Tax incidence.

85
Q

Represents innovation that can reduce the cost of production or bring new products.

A

Technological change.

86
Q

A logical view of how things work and is frequently formulated on the basis of observation.

A

Theory.

87
Q

The sum of fixed cost and variable cost.

A

Total cost.

88
Q

A measure of the total satisfaction derived from consuming a given amount of goods and services.

A

Total utility.

89
Q

These are related to the output produced.

A

Variable costs.

90
Q

A study that aims to understand the world without value judgments.

A

Positive analysis

91
Q

A study that makes value judgments

A

Normative analysis

92
Q

A normative analysis that weighs the gains and losses to different individuals to determine changes that provide greater benefits than harm.

A

Cost-benefit analysis

93
Q

The amount a customer is willing and able to pay for a good.

A

Willingness-to-pay.

94
Q

A normative analysis that trades off gains and losses to different individuals.

A

Welfare analysis.

95
Q

The value that one foregoes in purchasing a product or undertaking an activity.

The value of the best foregone alternative.

A

Opportunity cost.

96
Q

The amount of money that provides equal utility to the random payoff of the the gamble

A

Certainty equivalent

97
Q

Field devoted to studying the buying or selling of assets and options to reduce overall risk.

A

Risk management.

98
Q

The difference between the expected payoff and the certainty equivalent

A

Risk premium

99
Q

Method of valuation in which each item is first evaluated separately and then the item values are added together to arrive at a total value.

A

Hedonic pricing.

100
Q

A model of the choices that people make, presuming that they select ont he basis of their own welfare only.

A

Homo Economicus

101
Q

Selfishness

A

Self-interested behavior.

102
Q

A psychological tendency to invest more once one has made a significant nonrecoverable investment, even when subsequent investment isn’t warranted.

A

Sunk cost fallacy

103
Q

A prediction that allows one to determine how one variable affects another, at least in the setting described by the model.

A

Comparative static.

104
Q

Term meaning “the derivative of.”

A

Marginal.

105
Q

The value of consuming a good, minus the price paid.

A

Consumer surplus.

106
Q
A
107
Q

Condition in which the value of the last unit declines as the number cosumed rises.

A

Diminishing marginal value.

108
Q

Goods whose demand doesn’t increase with income.

A

Inferior good

109
Q

Goods whose demand increases with income.

A

Normal good

110
Q

For a given good x, a good whose consumption incrases the value of x.

A

Complement

111
Q

For a given good x, a good whose consumption decreases the value of x.

A

Substitute

112
Q

A good whose cost falls as the amount produced of another good rises.

A

Complement in supply

113
Q

A good whose cost rises as the amount produced of another good rises.

A

Substitute in supply.

114
Q

Means that the way a good or service is produced is divided into a number of tasks that are performed by different workers, instead of all the tasks being done by the same person.

A

Division of labor

115
Q

Physical restrictions on output.

A

Quotas

116
Q

In a price control situation, where there is excess demnand, money paid by an incoming tenant, sometimes directly to an existing tenant or to the building superintendent, or possible to a real estate broker who will “buy out” the existing tenant.

A

Key money

117
Q

A tax whose amount is based on the value of a transaction or of property. It is typically imposed at the time of a transaction, as in the case of a sales tax or value-added tax (VAT)

A

Ad valorem tax (Latin for “according to value”)

118
Q

Describes how the burden of a tax is shared between buyer and seller.

A

Tax incidence

119
Q

If the value lies between unity and 0.

A

Demand is inelastic

120
Q

If the value is exactly one.

A

Demand is unit elastic

121
Q

A mathematical condition for maximization stating that the second derivative is nonpositive.

A

Second-order condition

122
Q

A mathematical condition for optimization stating that the first derivative is zero.

A

First-order condition

123
Q
A

ECON 528 (2 decks)

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