The Basics Flashcards
Learn the fundamental terms of Econ!
Economics
the study of how humans make choices under conditions of scarcity
Macro-Economics
the branch of economics that focuses on broad issues such as growth, unemployment, inflation, and trade balance
Micro-Economics
the branch of economics that focuses on actions of particular agents within the economy, like households, workers, and business firms
Market
interaction between potential buyers and sellers; a combination of demand and supply
Scarcity
when human wants for goods and services exceed the available supply
Demand
the relationship between price and the quantity demanded of a certain good or service
Supply
the relationship between price and the quantity supplied of a certain good or service
Demand Curve
a graphic representation of the relationship between price and quantity demanded of a certain good or service, with quantity on the horizontal axis and the price on the vertical axis
Supply Curve
a line that shows the relationship between price and quantity supplied on a graph, with quantity supplied on the horizontal axis and price on the vertical axis
Opportunity Cost
measures cost by what we give up/forfeit in exchange; opportunity cost measures the value of the forgone alternative
Equilibrium
the situation where quantity demanded is equal to the quantity supplied; the combination of price and quantity where there is no economic pressure from surpluses or shortages that would cause price or quantity to change
Equilibrium Price
the price where quantity demanded is equal to quantity supplied
Equilibrium Quantity
the quantity at which quantity demanded and quantity supplied are equal for a certain price level
Law of Demand
the common relationship that a higher price leads to a lower quantity demanded of a certain good or service and a lower price leads to a higher quantity demanded, while all other variables are held constant
Law of Supply
the common relationship that a higher price leads to a greater quantity supplied and a lower price leads to a lower quantity supplied, while all other variables are held constant
Price
what a buyer pays for a unit of the specific good or service
Price Ceiling
a legal maximum price
Surplus
at the existing price, quantity supplied exceeds the quantity demanded; also called excess supply
Elastic
a small change in price leads to a large change in quantity demanded or supplied. Example: Luxury Goods
In-Elastic
a change in price has little to no effect on quantity demanded or supplied. Example: Essential goods like medicine or gasoline.
Elastic Demand
when the elasticity of demand is greater than one, indicating a high responsiveness of quantity demanded or supplied to changes in price
Elastic Supply
when the elasticity of either supply is greater than one, indicating a high responsiveness of quantity demanded or supplied to changes in price
Elasticity
an economics concept that measures responsiveness of one variable to changes in another variable
Money
whatever serves society in four functions: as a medium of exchange, a store of value, a unit of account, and a standard of deferred payment.
Asset
item of value that a firm or an individual owns
Balance Sheet
an accounting tool that lists assets and liabilities
Credit Card
immediately transfers money from the credit card company’s checking account to the seller, and at the end of the month the user owes the money to the credit card company; a credit card is a short-term loan
Debit Card
like a check, is an instruction to the user’s bank to transfer money directly and immediately from your bank account to the seller
Liability
any amount or debt that a firm or an individual owes
Net Worth
the excess of the asset value over and above the amount of the liability; total assets minus total liabilities
