Vocab Ch 1,2,3 Flashcards
0
Q
Scarcity
A
Too few goods and services
to satisfy all wants and
needs.
1
Q
Economics
A
The study of how scarce, or limited, resources are used to satisfy unlimited wants and needs; the study of decision making in a world of scarcity.
2
Q
tradeoffs
A
Giving up one thing for
something else.
3
Q
Value Judgment
A
The relative importance one
assigns to an action or
alternative.
4
Q
Opportunity Cost
A
The cost of a purchase or decision measured in terms of a forgone alternative; what was given up to make a purchase or carry out a decision.
5
Q
Efficiency
A
Producing a given good or
service at the lowest
possible cost; getting the
most output from resources.
6
Q
Equity
A
Justice or fairness in the
distribution of goods and
services.
7
Q
Resources (Factors of
Production)
A
Persons and things used to produce goods and services; limited in amount; categorized as labor, capital, land, and entrepreneurship.
8
Q
Labor
A
Physical and mental human
effort used to produce goods
and services.
9
Q
Capital
A
Items, such as machinery
and equipment, used in the
production of goods and
services.
10
Q
Land
A
Productive inputs that
originate in nature, such as
coal and fertile soil.
11
Q
Entrepreneurship
A
The function of organizing resources for production and taking the risk of success or failure in a productive enterprise.
12
Q
Wages
A
Income return to labor.
13
Q
Interest
A
Income return to owners of
capital.
14
Q
Rent
A
Income return to owners of
land resources.
15
Q
Profit
A
Income return to those
performing the
entrepreneurial function.
16
Q
Economic Theory
A
A formal explanation of the
relationship between
economic variables.
17
Q
Labor
A
The setting within which
an economic theory is
presented.
18
Q
Assumptions
A
Conditions held to be true
within a model.
19
Q
Econometrics
A
The use of statistical
techniques to describe the
relationships between
economic variables.
20
Q
Economic Policy
A
A guide for a course of
action.
21
Q
Graph
A
An illustration showing the relationship between two variables that are measured on the vertical and horizontal axes.
22
Q
Direct Relationship
A
Two variables move in the
same direction: when one
increases, so does the
other; graphs as an upwardsloping line.
23
Q
Inverse Relationship
A
Two variables move in opposite directions: when one increases, the other decreases; graphs as a downward-sloping line.
24
Production Possibilities
| Table (or Curve)
```
Gives the various amounts
of two goods that an
economy can produce with
full employment and fixed
resources and technology.
```
25
Unemployment
Resources available for
production are not being
used.
26
Economic Growth
An increase in an economy’s
full employment level of
output over time.
27
Capital Goods
Goods, such as machinery
and equipment, that are
used to produce other goods
and services.
28
Consumer Goods
Goods, such as food and
household furniture, that are
produced for final buyers.
29
Macroeconomics
The study of the operation of
| the economy as a whole.
30
Microeconomics
The study of individual
decision making units and
markets within the economy.
31
Basic Economic
| Decisions
```
The choices that must be
made in any society
regarding what to produce,
how to produce, and to
whom production is
distributed.
```
32
Economic System
The way in which an
economy is organized to
make the basic economic
decisions.
33
Traditional, or Agrarian,
| Economy
An economy that relies
largely on tradition, custom,
or ritual when making the
basic economic decisions.
34
Barter
The direct exchange of
goods or services for other
goods or services.
35
Market Economy
```
An economy in which the
basic economic decisions are
made by individual buyers
and sellers in markets using
the language of price.
```
36
Price System
A market system; one in
which buyers and sellers
communicate through prices
in markets.
37
Private Property Rights
Individual rights to possess
and dispose of goods,
services, and resources.
38
Free Enterprise
The right of a business to
make its own decisions and
to operate with a profit
motive.
39
Capitalism
```
An economic system with
free enterprise and private
property rights; economic
decision making occurs in a
market environment.
```
40
Circular Flow Model
```
Circular Flow Model
A diagram showing the real
and money flows between
households and businesses
in output, or product,
markets and input, or
resource, markets.
```
41
```
Output Markets (Product
Markets)
```
Markets in which businesses
are sellers and households
are buyers; consumer goods
and services are exchanged.
42
```
Input Markets (Resource
Markets)
```
```
Markets in which households
are sellers and businesses
are buyers; factors of
production are bought and
sold.
```
43
Least-Cost (Efficient)
| Method of Production
The method of production
that allows a given good or
service to be produced at
the lowest cost.
44
Market Failure
A market system creates a
problem for a society or fails
to achieve a society’s goals.
45
Government Regulation
Government commissions
and boards are involved in
business decision making.
46
Planned Economy
| (Command Economy)
```
An economy in which the
basic economic decisions
are made by planners rather
than by private individuals
and businesses.
```
47
Socialism
```
An economic system in
which many of the factors of
production are collectively
owned, and an attempt is
made to equalize the
distribution of income.
```
48
Planning Failure
Centralized planning creates
a problem for a society or
fails to achieve a society’s
goals.
49
Mixed Economy
An economic system with
some combination of market
and centralized decision
making.
50
privatization
```
The granting to individuals of
property rights to factors of
production that were once
collectively owned, or owned
by the state.
```
51
Laissez-Faire Capitalism
Capitalism with a strong
emphasis on individual
decision making; little or no
government interference.
52
Mercantilism
```
An economic system or
philosophy that subordinates
individual interests and
decisions to those of the
state.
```
53
Invisible Hand Doctrine
```
Adam Smith’s concept that
producers acting in their own
self-interest will provide
buyers with what they want
and thus advance the
interests of society.
```
54
Industrial Revolution
```
A time period during which
an economy becomes
industrialized; characterized
by such social and
technological changes as
the growth and development
of factories.
```
55
Muckrakers
Authors, journalists, and
others who sensationalized
American social problems in
the early twentieth century.
56
New Deal
```
A series of programs and
legislative reforms instituted
during the administration of
Franklin D. Roosevelt in the
Great Depression of the
1930s.
```
57
Employment Act
| of 1946
```
Legislation giving the federal
government the right and
responsibility to provide an
environment for the
achievement of full
employment, full production,
and stable prices.
```
58
Demand
```
The different amounts of a
product that a buyer would
purchase at different prices
in a defined time period when
all nonprice factors are held
constant.
```
59
Demand Schedule
```
A list of the amounts of a
product that a buyer would
purchase at different prices
in a defined time period when
all nonprice factors are held
constant.
```
60
Law of Demand
There is an inverse
relationship between
the price of a product and
the quantity demanded.
61
Demand Curve
```
A line on a graph that
illustrates a demand
schedule; it slopes downward
because of the inverse
relationship between price
and quantity demanded.
```
62
Supply
```
The different amounts of a
product that a seller would
offer for sale at different
prices in a defined time
period when all nonprice
factors are held constant.
```
63
Supply Schedule
```
A list of the amounts of a
product that a seller would
offer for sale at different
prices in a defined time
period when all nonprice
factors are held constant.
```
64
Law of Supply
There is a direct relationship
between the price of a
product and the quantity
supplied.
65
Supply Curve
```
A line on a graph that
illustrates a supply
schedule; it slopes upward
because of the direct
relationship between price
and quantity supplied.
```
66
Market
A place or situation in which
the buyers and sellers of a
product interact for the
purpose of exchange.
67
Market Demand and
| Market Supply
```
The demand of all buyers
and supply of all sellers in a
market for a good or service;
found by adding together all
individual demand or supply
schedules.
```
68
Shortage
```
Occurs in a market when the
quantity demanded is
greater than the quantity
supplied, or when the
product’s price is below the
equilibrium price.
```
69
Surplus
```
Occurs in a market when the
quantity supplied exceeds
the quantity demanded, or
when the product’s price is
above the equilibrium price.
```
70
Equilibrium Price and
| Equilibrium Quantity
```
The price and quantity where
demand equals supply; price
and quantity toward which a
free market automatically
moves.
```
71
Market Clearing Price
Equilibrium price; price at
which the quantity
demanded equals the
quantity supplied.
72
Change in Quantity
Demanded and Quantity
Supplied
```
A change in the amount of a
product demanded or
supplied that is caused by a
change in its price;
represented by a movement
along a demand or supply
curve from one price–quantity
point to another.
```
73
Change in Demand
```
A change in the demand
schedule and curve for a
product caused by a change
in a nonprice factor
influencing the product’s
demand; the demand curve
shifts to the right or left.
```
74
Nonprice Factors
| Influencing Demand
```
Nonprice factors, such as
income, taste, and
expectations, that help to
determine the demand for a
product.
```
75
Normal Good (or Service)
Income changes relate
directly to the demand for
the good or service.
76
Inferior Good (or Service)
Income changes relate
inversely to the demand for
the good or service.
77
Increase in Demand
```
A change in a nonprice
influence on demand causes
more of a product to be
demanded at each price; the
demand curve shifts to the
right.
```
78
Decrease in Demand
```
A change in a nonprice
influence on demand causes
less of a product to be
demanded at each price; the
demand curve shifts to the
left.
```
79
Change in Supply
```
A change in the supply
schedule and curve for a
product caused by a change
in a nonprice factor
influencing the product’s
supply; the supply curve
shifts to the right or left.
```
80
Nonprice Factors
| Influencing Supply
```
Nonprice factors, such as
the cost of production and
the number of sellers in the
market, that help to
determine the supply of a
product.
```
81
Increase in Supply
```
A change in a nonprice
influence on supply causes
more of a product to be
supplied at each price; the
supply curve shifts to the
right.
```
82
Decrease in Supply
```
A change in a nonprice
influence on supply causes
less of a product to be
supplied at each price; the
supply curve shifts to the left.
```
83
Price Ceiling
| (Upper Price Limit)
```
A government-set maximum
price that can be charged for
a good or service; if the
equilibrium price is above
the price ceiling, a shortage
will develop.
```
84
Usury Laws
Laws setting maximum
interest rates that can be
charged for certain types of
loans.
85
Price Floor
| (Lower Price Limit)
```
A government-set minimum
price that can be charged for
a good or service; if the
equilibrium price is below
the price floor, a surplus will
develop.
```
86
Price Elasticity
A measure of the strength of
buyers’ or sellers’ responses
to a price change.
87
Price Elastic
```
A strong response to a price
change; occurs when the
percentage change in the
quantity demanded or
supplied is greater than the
percentage change in price.
```
88
Price Inelastic
```
A weak response to a price
change; occurs when the
percentage change in the
quantity demanded or
supplied is less than the
percentage change in price.
```
89
Elastic Price Change
| and Total Revenue
Total revenue moves in the
opposite direction of a price
change when consumers
react strongly or elastically.
90
Inelastic Price Change
| and Total Revenue
Total revenue moves in the
same direction of a price
change when consumers
react weakly or inelastically.
