Midterm 1 terms and rukes Flashcards
What is economics?
The social science that studies trade and production.
spontaneous order?
Order that is the product if human action, but not human design.
What is a price system?
A network of interrelated prices of goods and services.
What is a Positive analysis?
An attempt to describe how the world is. (Fact)
What is Normative analysis?
Analysis that describes a value judgment. (Bias)
What is a theory?
An abstract explanation of some phenomenon.
What is a society?
A group of people who have moral, political, or economical relationships with each other.
What is a market economy?
A social system where resources are privately owned and controlled.
What is property right?
A moral na legal right to control a resource and to exclude others from using it. (laid-faire)
What is a command Economy?
A social system in which resources are collectively owned or controlled. (communism)
What is a mixed economy?
A social system in which some resources are privately owned and controlled and some are owned or controlled by the government. ( a mix of command economy and market economy)
What is Scarcity?
the amount of goods available is not sufficient to satisfy all human desires.
What is “Unlimted desires”
No matter what ones current circumstance, it is always possible to imagine and achieve a more desirable state of affairs.
Who is a Methodological individualism?
The principle that the individual human being I the basic unit of research in the social sciences.
What is rational choice?
People pursue their personal values.
What is the exchange of equivalent goods?
The theory that people exchange one good for another when both parties value the good equally.
What is just a price theory?
The theory that there is a single just price at which each good should be sold.
What did mercantilists believe in?
Social order requires government planning, Money constitutes real wealth for a nation.
What are the four starting point of economics?
1.scarcity
2. Unlimited desires
3. Methodologies individualism
4. Rational choice
What is the exchange of equivalent?
The theory that people exchange one good for another when both parties value the goods equally.
what is Just a price theory?
The theory that there is a single just price at which each good should be sold for.
what is the nominal value of money?
The face value of a certain amount of money.
What is the Real value of money?
The goods and services that can be purchased with a certain amount of money.
What is a zero-sum game.
A system in which for one party to gain, another has to loss.
What is a mutually Beneficial exchange?
An exchange that benefits both parties.
Who was Adam Smith?
The founder of economic sciences. (1723-1790)
What deos the invisible hand refer to?
Adam Smiths metaphor for the power of the invisible self-interest to create spontaneous order.
What is utility?
Usefulness in satisfying human desire .
What was the subjective theory of price?
The theory that the price of a good is determined by its utility.
What is the water- diamond paradox?
Water is very useful but has a low price, while a diamond is not very useful but still has a high price.
What is the theory of value?
The theory that the price of a good is determined by its cost of production.
what was the marginal revolution?
The discovery of the theory of marginal utility in the early 1870’s
what is a consumer good?
a good that serves our desires directly.
what is a producer good?
a good that is used in the production of another good.
what is the theory of derived demand?
The value of goods of higher order is. derived from that of the corresponding goods of lower order.
marginal
at the edge
what is a marginal unit
the next unit gained or given up
What is Marginal utility.
The additional utility that a person gets from having one more unit of a good or loses from having one less unit of a good.
what is the theory of marginal utility?
The theory that the price of a good is determined be its marginal utility.
What is Ordinal ranking?
A list in order of preference
What is opportunity cost?
The best alternative given up when making a choice.
What is diminishing marginal utility?
As a person acquires more units of a good, the satisfaction they derive from each new unit is lower than the previous unit.
What is increasing marginal opportunity cost?
As a person gives up more units of a good, the satisfaction they give up with each new unit is higher than the previous unit.
What is the range of indeterminacy
The range of potential prices.
What is the Market clearing price?
A price at which anyone who wants to buy or sell can find a willing trade partner.
what is quantity demanded?
The amount of a good a person is willing and able to buy at a particular price.
What is the demand curve?
The curve that shows the relationship between the price of a. good and the quantity demanded.
What is the law of demand?
There is a negative relationship between the price of a good and the quantity demanded.
What does ceteris paribus mean?
Holding all other variables constant
what is the quantity supplied?
The amount of a good a person is willing and able to sell at a particular price.
What the the supply curve
The curve that shows the relationship between the price of a good and the quantity supplied.
What is the law of supply?
The law of supply is the positive relationship between the price and the quantity supplied.
What is the market clearing price.
A price where the quantity demanded and quantity supplied are equal.
what is the market clearing quantity.
The number of exchanges that take place at a market clearing price.
