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Econ exam 1
the fundamentals of microeconomics 101
42
Economics
Undergraduate 1
02/08/2017

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Term
Scarcity
Definition
the condition in which our wants (for goods) are greater than the limited resources (land, labor, capital, and entrepreneurship) available to satisfy those wants.
Term
Utility
Definition
a measure of satisfaction, happiness, or benefit that results from consuming a good.
Term
Good
Definition
anything from which individuals receive utility or satisfaction
Term
Resources
Definition
the goods or services available to individuals and businesses used to produce valuable consumer products
Term
Land
Definition
all natural resources such as minerals, forests, water, and unimproved land.
Term
Labor
Definition
The physical and mental talents people contribute to the production process
Term
Capital
Definition
produced goods that can be used as inputs for further production such as factories, machinery, tools, computers and buildings.
Term
Entrepreneurship
Definition
the talent that some people have for organizing the resource of land, labor, and capital to produce goods, seek new business opportunities and develop new ways of doing things.
Term
Opportunity cost
Definition
the most highly values opportunity or alternative forfeited when a choice is made.
Term
Ceteris paribus
Definition
a Latin term meaning “all other things constant” or “nothing else changes”
Term
Law of Increasing Opportunity Costs
Definition
as more of a good is produced the opportunity costs of producing that good increase.
Term
Demand
Definition
the willingness and ability of buyers to purchase different quantities of a good at different prices during a specific time period
Term
Law of Demand
Definition
as the price of a god rises the quantity demanded of the good falls and as the price of the good falls the quantity demanded of the good rises.
Term
Supply
Definition
the wiliness and ability of producers to produce and offer to sell different quantities of a good at different prices during a specific period of time.
Term
Law of supply
Definition
As the price of a good rises the quantity supplied of the good rises and as the price of the good falls the quantity supplied of the good falls
Term
Inferior goods
Definition
a good for which demand falls (rises) and income rises(falls).
Term
Normal goods
Definition
a good for which demand rises(falls) as income rises(falls).
Term
Quantity demanded
Definition
the wiliness and ability of buyers to purchase a specific quantity of a good at a specific price.
Term
Quantity supplied
Definition
the willingness and ability of producers to produce and offer for sale a specific quantity of a good at a specific price.
Term
Equilibrium price
Definition
the one and only price at which the quantity demanded of a good is equivilant to the quantity supplied of the good.
Term
Shortage
Definition
a condition in which the quantity demanded of a good is greater than the quantity supplied of the good.
Term
Surplus
Definition
a condition in which the quantity supplied of a good is greater than the quantity demanded of the good
Term
Compliments
Definition
two goods that are used jointly in consumption. As the price of one good rises the demand for the other good falls and as the price of one good falls the demand for the other good rises.
Term
Substitutes
Definition
two goods that satisfy similar needs or desires. If two goods are substitutes, the demand for one rises as the price of the other rises. Vice versa
Term
Consumer surplus
Definition
the difference between the maximum price a buyer is willing and able to pay for a good or service and the price actually payed. CS=maximum buying price – price payed.
Term
Producers surplus
Definition
the difference between the price sellers receive for a good and the minimum of lowest price for which they would have sold the good. PS=price received – minimum selling price.
Term
Price ceiling
Definition
a government mandated maximum price above which legal trades cannot be made.
Term
Price floor
Definition
a government mandated minimum price bellow which legal trades cannot be made.
Term
Price elasticity of demand
Definition
a measure of the responsiveness of a quantity demanded to changes in price.
Term
Elastic Demand
Definition
the demand when the percentage change in quantity demanded is greater than the percentage change in price. The quantity demanded changes proportionally more that price changes.
Term
Inelastic demand
Definition
the demand when the percentage changed in quantity demanded is less than the percentage changed in price. The quantity demanded changes proportionally less than price changes.
Term
Perfectly elastic demand
Definition
the demand when a small percentage change in price causes and extremely large percentage change in the quantity demanded. (from all to nothing)
Term
perfectly inelastic demand
Definition
the demand when the quantity demanded does not change as price changes.
Term
Unit elastic demand
Definition
the demand when the percentage change in quantity demanded is equal to the percentage change in price. The quantity demanded changes proportionally to price changes.
Term
Total revenue
Definition
price times quantity sold.
Term
Cross elasticity of demand
Definition
a measure of the responsiveness in quantity demanded of one good to changes in the price of another good.
Term
income elasticity of demand
Definition
a measure of the responsiveness of quantity demanded to changes in income.
Term
Price elasticity of supply
Definition
a measure of responsiveness of quantity supplied to changes in price.
Term
Marginal utility
Definition
the additional utility a person receives from consuming an additional unit of a good.
Term
Total utility
Definition
the total satisfaction person receives from consuming a particular quantity of a good
Term
Law of diminishing marginal utility
Definition
the marginal utility gained by consuming equal successive units of a good will decline as the amount consumed increases.
Term
consumer equilibrium
Definition
the equilibrium that occurs when the consumer has spent all income and the marginal utilities per dollar spent on each good purchased are equal.
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