Econ 101 Vocab

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Econ 101 Vocab
2011-09-24 21:11:10

First mid term vocab
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  1. Producer Price Index
    A measure of overall cost of goods/services bought by firms
  2. Substitution Bias
    As price changes for each individual goods, consumers change their consumption behavior (buy more of the cheaper goods, substituting the expensive goods), but CPI measurement assumes fixed baskets of goods (quantity of goods bought/sold don't change)
  3. Intro of new goods
    the prices of new goods and the amount of new goods consumed are not included in the CPI measurement (unless we adjust CPI measurement to include the new goods). Intro of new goods makes dollars (money used to buy goods) more valuable in terms of the ability to buy more variety of goods, so CPI doesn't capture this increase in value of dollars thus overstating the inflation.
  4. Unmeasured Quality Changes
    CPI measurement does not reflect the changes in the dollar value when the quality of the goods changes while the prices remain the same. With an increase in quality of the goods (assuming the price stays the same), the dollar alue increases; the cost of living decreases. However, CPI measurement does not reflect this change of dollar alues, so it would overestate inflation
  5. GDP Deflator
    relects the prices of all goods/services [produced domestically
  6. Consumer Price Index
    relfects the prices of all goods/servces bought by consumers
  7. Indexation
    the automatic correction by law or contract of a dollar amoud for the effect of inflation
  8. Nominal Interest Rate
    the interest rate reported without the correction for the effect of inflation
  9. Real interet rate
    the interest rate reported with a correction for the effect of inflation
  10. Gross Domestic Product
    the market value of all final goods/services produced within a country in a given period of time
  11. equilibrium price
    the price that balances quantity supplied and quantity demanded
  12. equilibrium quantity
    the quantity (suppled/demanded) at equilibrium price
  13. shortage
    quantity supplied < quantity demanded
  14. supply schedule
    table that shows the relationship between the price of a good/service and the quantity supplied
  15. quantity supplied
    the amount of goods/services that sellers are willing to sell
  16. law of supply
    the quantity supplied of a good/service rises; certeris parius
  17. demand schedule
    table that shows the relationship between the pice of a good and the quantity demanded
  18. quantity demanded
    the amound of a good that buyers are willing and able to purchase
  19. law of demand
    the quantity demanded of a good rises when the price of the good falls, assuming all else is constant (ceteris paribus)
  20. market
    a group of buyers and sellers of a particular goods/service
  21. competitive market
    a market where thereare many buyers and sellers that each has a negligiable impact on the market price (no one can influence the market price individually, ex the heroic buyer's $10 bid attempt against the market price of $40 from Aplia Experiment)
  22. Scare resources
    • land
    • time
    • income
  23. opportunity cost
    doesn't equal the net value
  24. net value =
    opportunity cost + cost
  25. absolute advantage
    ability to produce goods using fewer inputs than outputs
  26. comparative advantage
    the ability to produce a good at a lower opportunity cost than others (specialize)
  27. price of trade
    for both parties to gain from trade, the price at which they trade must lie between the opportunity costs