Term
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Definition
| a simplified representation of a real situation that is used to better understand real-life situations |
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Term
| other things equal assumption |
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Definition
| all other relevant factors remain unchanged |
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Term
| production possibility frontier |
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Definition
| illustrates the trade-offs facing an economy that produces only two goods. Its shows the maximun quantity of one good that can be produced for any given quantity produced of the other |
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Term
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Definition
| resources used to produce goods and servies |
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Term
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Definition
| technical means for producing goods and services |
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Term
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Definition
| an individual has this when they produce a good or service if the opportunity cost of producing the good or service is lower for that individual than for other people |
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Term
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Definition
| an individual has this if he or she can do it better than other people. having this is not the same thing as having a comparative advantage |
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Term
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Definition
| when people directly exchange goods or services that they have for goods or services they want |
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Term
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Definition
| represents the transactions of an economy by flows around a circle |
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Term
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Definition
| a person or group of people that share their income |
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Term
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Definition
| an organization that produces goods and servies for sale |
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Term
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Definition
| where firms buy the resources they need to produce goods and services |
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Term
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Definition
| the way in which the total income of an economy is divided among the owners of the various factors of production |
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Term
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Definition
| the branch of economic analysis that describes the way in which the economy actually works |
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Term
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Definition
| makes prescriptions about the way the economy should work |
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Term
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Definition
| a simple prediction of the future |
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Term
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Definition
| is a market in which there are many buyers and sellers of the same good or service none of whom can influence the price at which the supply or service is sold |
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Term
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Definition
| a model of how a competitive market works |
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Term
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Definition
| shows how much of a good or service consumers will want to buy at different prices |
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Term
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Definition
| the actual amount of a good or service consumers are willing to buy at some specific price |
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Term
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Definition
| a graphical representation of the demand schedule. it shows the relationship between quantity demanded and price |
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Term
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Definition
| says that a higher price for a good or service, other things equal, leads people to demand a smaller quantity of that good or service |
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Term
| shift of the demand curve |
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Definition
| a change in the quantity demanded at any given price, represented by the change of the original demand curve to a new position, demanded by a new demand curve |
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Term
| movement along the demand curve |
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Definition
| a change in the quantity demanded of a good that is the result of a change in that goods price |
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Term
| movement along the demand curve |
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Definition
| a change in the quantity demanded of a good that is the result of a change in that goods price |
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Term
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Definition
| when the price of one of the goods leads to an increase in the demand for the other good |
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Term
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Definition
| if a rise in price of one good leads to a decrease in the demand for the other good |
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Term
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Definition
| when a rise in income increases the demand of a good |
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Term
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Definition
| when a rise in income decreased the demand for a good |
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Term
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Definition
| illustrates the relationship between quantity demanded and price for an individual consumer |
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Term
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Definition
| the actual amount of a good or service producers are willing to sell at some specific price |
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Term
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Definition
| shows how much of a good or service producers will supply at different prices |
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Term
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Definition
| shows the relationship between quantity supplied and price |
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Term
| shift of the supply curve |
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Definition
| a change in the quantity supplied of a good or service at any given price. Its is represented by the change of the original supply curve to a new position, denoted by the new supply curce |
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Term
| movement along the supply curve |
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Definition
| a change in the quantity supplied of a good that is the result of a change in that good's price |
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Term
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Definition
| a good or service that is used to produce another good or service |
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Term
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Definition
| illustrates the relationship between quantity supplied and price for an individual producer |
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Term
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Definition
| the price at which price has moved to a level at which the quantity of a good or service demanded equals the quantity of that good or service supplied |
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Term
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Definition
| the price at which price has moved to a level at which the quantity of a good or service demanded equals the quantity of that good or service supplied |
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Term
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Definition
| quantity at which a good or service is bought and sold at the equilibrium price |
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Term
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Definition
| when the quantity supplied exceeds the quantity demanded. Surpluses occur when the price is above the equalibrium level |
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Term
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Definition
| when the quantity demanded exceeds the quantity supplied. These occur when the price is below its equilibrium level |
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Term
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Definition
| the maximum price at which he or she would by a good |
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Term
| individual consumer surplus |
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Definition
| the net gain to an individual buyer from the purchase of a good. It is equal to the difference between the buyers willingness to pay and the price paid |
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Term
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Definition
| the sum of individual consumer surpluses of all the buyers of a good in a market |
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Term
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Definition
| often used to refer to both individual and to total consumer surplus |
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Term
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Definition
| the lowest price at which he or she is willing to sell a good |
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Term
| individual producer surplus |
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Definition
| the net gain to an individual seller from selling a good. it is equal to the difference between the price received and the sellers cost. |
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Term
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Definition
| the sum of the individual producer surpluses of all the sellers of a good in the market |
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Term
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Definition
| refers to both individual and total producer surplus |
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Term
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Definition
| the total net gain to consumers and producers from trading in the market. it is the sum of the producer and the consumer surplus |
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Term
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Definition
| the rights of owners of valuable items, whether resources or goods, to dispose of those items as they choose |
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Term
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Definition
| any piece of information that helps people make better economic decisions |
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Term
| inefficient market / economy |
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Definition
| when there are missed opportunities ; some people could be better off with without making other people worse off |
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Term
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Definition
| when a market fails to be efficient |
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Term
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Definition
| legal restrictions on how high or low a market price may go |
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Term
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Definition
| a maximum price sellers are allowed to charge for a good or service |
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Term
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Definition
| minimum price buys are required to pay for a good or service |
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Term
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Definition
| the loss in total surplus that occurs whenever an action or a policy reduces the quantity transacted below the efficient market equilibrium quantity |
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Term
| inefficient allocation to consumers |
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Definition
| price ceilings often lead to this; people who want the good badly and are willing to pay a high price dont get it, and those who are relatively little about the good are only willing to pay a low price to get it |
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Term
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Definition
| price ceilings lead to this; people expend money, effort and time to cope with the shortages caused by the price ceiling |
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Term
| inefficiently low quality |
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Definition
| price ceilings lead to this; sellers offer low- quality goods at a low price even though buyers would prefer a higher quality at a higher price |
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Term
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Definition
| a market in which goods or services are bought and sold illegally - either because it is illegal to sell them at all or because the prices charged are legally prohibited by a price ceiling |
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Term
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Definition
| legal floor on the wage rate, market price of labor |
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Term
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Definition
| an upper limit on the quantity of some good that can be bought or sold |
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Term
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Definition
| the total amount of a good that can be legally transacted |
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Term
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Definition
| gives its owner the right to supply a good |
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Term
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Definition
| the price at which consumers will demand that quantity |
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Term
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Definition
| the price at which consumers will supply that quantity |
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Term
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Definition
| created by a quota, it is between the demand price and the supply price of a good; that is, the price paid by buyers ends of being higher than that recieved by sellers. |
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Term
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Definition
| the difference between the demand and supply price at the quota limit |
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Term
| price elasticity of demand |
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Definition
| the ratio of the percent change in the quantity demanded to the percent change in the price as we move along the demand curve (dropping the minus sign) |
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Term
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Definition
| a technique for calculating the percent change. in this approach we calculate changes in variable compared with the average or midpoint of the starting and final values |
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Term
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Definition
| when the quantity demanded does not respond at all to changes in the price. when the demand is inelastic the demand curve is a vertical line |
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Term
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Definition
| when any price increase will cause the quantity demanded to drop to zero. when the demand is perfectly elastic the demand curve is a horizontal line |
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Term
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Definition
| if the price elasticity of demand is more than 1 |
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Term
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Definition
| if the price elasticity of demand is less than 1 |
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Term
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Definition
| if the price elasticity of demand is 1 |
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Term
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Definition
| the total value of sales of a good or service. it is equal to the price multiplied by the quantity sold |
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Term
| cross price elasticity of demand |
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Definition
| measures the effect of the change in one goods price on the quantity demanded of the other good. it is equal to the percent change in the quantity demanded of one good divided by the percent change in the other good's price |
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Term
| income elasticity of demand |
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Definition
| the percent change in the quantity of a good demanded when a consumers income changes divided by the percent change in the consumers income |
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Term
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Definition
| if the income elasticity of demand for that good is greater than 1 |
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Term
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Definition
| if the income elasticity of demand for that good is positive but less than one |
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Term
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Definition
| a measure of the responsiveness of the quantity of a good supplied to the price of that good. it is the ratio of the percent change in the quantity supplied to the percent change in the price as we move along the supply curve |
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Term
| perfectly inelastic supply |
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Definition
| when the price elasticity of supply is zero, so that changes in the price of the good have no effect on the quantity supplied. a perfectly inelastic supply curve is a vertical line |
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Term
| perfectly elastic supply curve |
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Definition
| when even a tiny increase or reduction in price will lead to a very large change in the quantity supplied so that the price elasticity of supply is infinite. a perfectly elastic supply curve is a horizontal line |
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