microexam 1 Flashcards
Economics is the study of
choices
econmoics is the social science concerned with how individuals,
institutions, and society make optimal choices under
conditions of
scarcity
the condition whereby the resources we use to produce
goods and services are limited relative to our wants for
them
scarcity
signal that tells producers what and how much to
produce; in a standard market transaction it is paid by the
consumer
price
the sacrifice associated with making a choice; in
a standard market transaction it is paid by the producer
cost
out-of-pocket, monetary payments
explicit cost
most valued option forgone
opportunity/implicit cost
types of resrouces
labor, capital, entrepreneurship, natural
We try to maximize our ______by using by using _______ decision
making
utility, marginal
the satisfaction a consumer obtains from the
consumption of a good or service consumption of a good or service
utility
additional; the change that results from an
additional unit
marginal
statements about economic behavior or the economy that enable prediction of the probable effects of or the economy that enable prediction of the probable effects of certain actions
economic principles
In ______markets, households markets, households demand goods and services goods and services
which are which are supplied by firms in exchange for money
product
in ______markets, firms markets, firms demand resources which are resources which are supplied
by households in exchange for money
resouce
the price of a good and the quantity demanded price of a good and the quantity demanded
are inversely related
law of demand
the number of units consumers are of units consumers are
willing to buy at a willing to buy at a specific price
quantity demanded
In QD, a change in the amount purchased caused by a change in price results
in a movement ALONG the curve
What shifts the demand curve
income, price of related goods, expectations of future prices, number of buyers , taste and preferences
How does income and demand move for a normal good
together
How do income and demand move for a inferior good
opposite
How does the price of one good and demand for another move for substitutes
together
How does the price of one good and demand for another move for complements
opposite
How does the expectations of future prices and demand move
together
The more number of buyers
higher the demand
the price of a good and the quantity
supplied are directly (positively) related
law of supply
the number of units producers are of units producers are
willing to offer for sale at specific price
quanity supplied
change in the amount offered for sale caused by a
change in the price
shift along the supply curve
How do input prices and supply move
together
When technology improves
supply increases
Taxation and supply move
opposite
expectations of future prices and supply move
opposite
no tendency for change
equalibirum
the allocation of goods among consumers using prices
price rationing
economists believe that _______is the most
efficient method of allocating goods and services
price rationing
every consumer willing to pay at least the equilibrium
price will get to have the good
price rationing
With other rationing methods besides price , the allocation is
random
a measure of the relative responsiveness of one
variable to a change in another
elasticity
a tiny change in P causes
an infinite change in Qd
Price
Quantity
DP
EXAMPLE: Agricultural marketsE
perfect elastibility
ED = infinity
perfectly elastic
Ed>1, flat graph
elastic
ED= 1
unit elasticity
ED< 1 steep
inelastic
ED=0, price change has no affect of QD
perfect inelastically
