Card Set Information
Key Terms and Questions
What is Economics?
The study of how best to allocate scarce resources
among competing uses.
What are Opportunity Costs?
The most desired goods and services that are
forgone in order to obtain something else.
What are Factors of Production
resource inputs used to produce goods and
What is Scarcity?
Lack of enough resources to satisfy all the
desired uses of those resources.
What are Production Possibilities?
The alternative combinations of goods and services
that could be produced in a given time period with all available resources and
What is Economic Investment?
Expenditures on (production of) new plant and
equipment(capital) in a given time period, plus changes in business
What is Economic Growth?
An increase in output ( real GDP); an expansion of
What is Lassez Faire?
The doctrine of “ leave it alone,” of
nonintervention by government in the market mechanism.
What is Central Planning
planning (also central planning and central Economic planning (also central
planning and central economic planning) refers to any directing or planning of
economic activity by the state, in an attempt to achieve specific economic or
What is a Mixed Economy?
– An economy that uses both market and non-market signals to allocate goods and
What is Market Failure?
An imperfection in the market mechanism that
prevents optimal outcomes.
What are Externalities?
Costs ( or benefits) of a market activity borne by
a third party; the difference between the social and private costs (or
benefits) of a market activity.
What is Government Failure?
Government intervention fails to improve economic outcomes
What is Market Mechanism?
The use of market prices and sales to signal desired outputs( or resource allocations)
What is Real GDP?
The inflation-adjusted value of GDP: the value of output measured in constant prices.
What is Nominal GDP?
The value of output measured in current prices.
What is Per Capita GDP?
Total GDP divided by total population: Average GDP
What are Income Transfers?
Payments to individuals for which no current goods or sevice are exchanged; e.g. Social Security, Welfare, Unemployment benefits
What are exports?
Goods and Services sold to foreign buyers.
What are imports?
Goods and Services purchased from foreign sources.
What is Capital Intensive?
Production processes that use a high ratio of capital to labor inputs.
What is Productivity?
Output per unit of input, E.G. output per labor hour
What is Human Capital?
The knowledge and skills possessed by the workforce
What is a monopoly?
A firm that produces the entire market supply of a particual good or service.
What is Personal Distribution of Income?
The way total personal income is divided up among households or income classes.
What is a progressive tax?
A tax system in which tax rates rise as incomes rise
What is a Regressive Tax?
A tax system in which tax rates fall as income rise
What is a market?
Any place where goods are bought and sold.
What is a factor market?
Any place where factors of production are bought and sold
what is a product market?
Any place where finished goods and services are bought and sold.
What is a barter?
The direct exchange of one good for another, without the use of money
What is a supply?
The ability and willingness to sell specific quantities quantities of a good at alternative prices in a given period.
What is a demand?
The ability and willingness to buy specific quantities of a good at alternatice prices in a given time period,
What is a demand schedule?
A table showing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period,
what is a demand curve?
A curve describing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period,
what is a shift in demand?
A change in the quantity demanded at any(every) given price.
What is Market Demand?
The total quantities of a good or service people are willing and able to buy at alternative prices in a given time period; the sum of individual demands.
What is a market supply?
The total quantities of a good that sellers are willing and able to sell at alternative prices in a given time period,
what is the law of supply?
The quantity of a good supplied in a given time period increases as its price increases,
what is the equilibrium price?
the price at which the quantity of a good demnded in a given time period equals the quantity supplied.
what is a market shortage?
The amount by which the quantity demanded exceeds the quantity supplied at a given price: excess demand
What is a market surplus?
The amount by which the quantity supplied exceeds the quantity demanded at a given price: excess supply
what is a price ceiling?
Upper limit imposed on the price of a good or service.
What is a price floor?
Lower limit imposed on the price of a good
What is the law of demand?
The quantity of a good demanded in a given time period increases as its price falls,
What is Utility?
The pleasure of satifactin obtained from a good or service.
What is total utility?
The amount of satisfaction obtained from entire consumption of a product.
What is marginal utility?
The satisfaction obtained by consuming one additional (marginal) unit of a good or service
What is the law of diminishing marginal utility?
The marginal utility of a good declines as more of it is consumed in a given time period.
What is the Price elasticity of demand?
The percentage change in quantity demanded divided by the percent change in price.
what is total revenue?
The price of a product multiplied by the quantity sold in a given time period P x Q
What is a Product Function?
A technological relationship expressing the
maximum quantity of a good attainable from different combinations of factor
What is Marginal Physical Product? (MPP)
The change in total output associated with one additional unit of input.
What is the Law of diminishing returns?
The marginal physical product of a variable input declines as more of it is employed with a given quantity of other (fixed) inputs.
The period in which the quantity (and quality) of some inputs cannot be changed
A period of time long enough for all inputs to be varied (no fixed costs)
The difference between total revenue and total cost.
The market value of all resources used to produce a good or service
Costs of production that do not change when the rate of output is altered, e.g., the cost of basic plant and equipment
Costs of production that change when the rate of
output is altered, e.g., labor and material costs.
Average Total Cost ( ATC)
Total cost divided by the quantity produced in a
given time period.
Marginal Cost (MC)
The increase in total cost associated with a
one-unit increase in production.