Key Vocab Flashcards
Microeconomics
the study of decision-making by individual consumers, producers, and households
What is the basic economic problem?
Scarcity - every society has limited(finite) resources and unlimited wants
Factors that affect the quantity demanded:
- income
- fashion, trends and habits
- prices of substitute goods
- prices of complementary goods
- population changes
identify the goods and services that have joint demand
complementary goods
the determinants of demand are
- government policies
- economy
non-price determinants of demand(that will shift the demand curve) are
- income levels
- price of substitutes or complementary goods
- government policies
increase in demand
- causes a shift to the right of the demand curve
- at every price of the good, people are willing and able to buy more of it that before
Macroeconomics
the study of the economic behaviour of the entire economy
Market system
A market system works to allocate resources efficiently through the forces of demand and supply
What is a price mechanism
the price mechanism guides producers(sellers) and consumers (buyers) to decide what to produce and how to allocate their scarce resources between different products
The price mechanism is a system where the forces of demand and supply determine the prices of goods and services.
What is market dis/equilibrium
market equilibrium where the demand and supply of goods and services are equal.
Market disequilibrium occurs when supply exceeds demand or demand exceeds supply.
What are the three economic decisions?
What to produce?
How to produce it?
For whom to produce?
The three forms of economy
Free market economy – all decisions are taken by private sector individuals and businesses. There is little or no government intervention, and so there is no public sector .
Mixed economy – all decisions about resource allocation are taken together by the government and the private sector.
Planned economy – all decisions about resource allocation, prices and how goods and services will be produced and allocated are taken by the public sector.
State the law of demand
The law of demand states that there is a negative causal relationship between quantity demanded and prices of goods and services over a period of time, ceteris paribus : As the price of goods and services increases, the quantity demanded decreases. As the price of goods and services decreases, the quantity demanded increases
what are the non-price determinants of demand
non-price determinants of demand – such as income levels, prices of substitutes or complementary goods, and government policies
