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| the social science concerned with how individuals, institutions and society make optical choices under conditions of scarcity |
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| The condition whereby the resources we use to produce goods and services are limited relative to our wants for them |
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| Economic good. Good for which you can not get all you want at zero cost |
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| Opposite of scarce good. Good at which you can get all you want at zero cost |
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signal that tells producers what and how much to produce.
In a standard market transaction it is paid by the consumer. |
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| The sacrifice associated with making a choice. In a standard market transaction it is paid by the producer. |
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| What are the three types of cost? |
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Explicit
Implicit/Opportunity Cost
Economic Cost |
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| out-of-pocket, monetary payments |
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| Implicit is also called what? |
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| most valued option forgone |
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| the inputs used in the production of goods and services |
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| Resources are also known as |
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| What are the different types of factors of production? |
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| physical and mental talents used in production |
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| all manufactured goods used in production |
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| We try to maximize our UTILITY by using MARGINAL decision making. |
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| The satisfaction a consumer obtains from the consumption of a good or service. |
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| Additional. The change that results from an additional unit. |
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| Statements about economic behavior or the economy that enable prediction of the probable effects of certain actions. |
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| A simplified representation of how something works |
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| What are the two different markets? |
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| Any institution that brings together buyers and sellers of a particular good or service. YOU DO NOT HAVE TO MEET FACE TO FACE (ebay) |
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| Households DEMAND goods or services which are SUPPLIED by firms in exchange for money. |
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| firms DEMAND resources which are SUPPLIED by households in exchange for money. |
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| a table that shows how much of a good or service consumers will want to buy at various prices |
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| The price of a good and the quantity demanded are inversely related. |
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| a line that shows the maximum that consumers are willing to pay for at any price |
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| The relationship between P and Qd for all possible prices |
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| the number of units consumers are willing to buy at a specific price. |
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| Change in Quantity Demanded |
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| A change in the amount purchased caused by a change in the price; a movement along the curve. |
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| a shift of the entire curve to the left or right |
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| FACTORS THAT SHIFT THE DEMAND CURVE |
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Definition
1. Income
2. Price of related goods
3. Expectations of Future prices
4. Number of buyers
5. Taste and preferences |
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Definition
| goods for which income and demand move together |
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| goods for which income and demand move opposite |
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| What happens the the demand for Sam's cola (an inferior good) when income rises? |
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Definition
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Definition
| goods that take the place of each other in consumption. The price of one good and the demand for the other move together. |
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| goods that are used together in consumption. The price of one good and the demand for the other move opposite. |
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| What happens to the demand for peanut butter when the price of jelly (a complement) falls? |
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Definition
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| Expectations of Future Prices |
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| Expected future prices and current demand move together |
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| More buyers mean more demand |
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| example of number of buyers |
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Definition
| BABY BOOMERS grow older they are in higher demand for social security |
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| a table that shows how much of a good or service producers will offer for sale at various prices |
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| the price of a good and the quantity supplied are directly related. |
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| A line that shows the minimum that producers are willing to accept as payment for any quantity. |
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| The relationship between P and Qs for all possible prices |
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Definition
| the number of units producers are willing to offer for sale at a specific price |
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| Change in Quantity Supplied |
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Definition
| a change in the amount offered for sale caused by a change in the price; a movement along the curve |
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Definition
| A shift of the entire curve to the lift or right |
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| Factors that shift the supply curve |
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Definition
1. Input/Resource Prices
2. Technology
3. Taxes
4. Expectations of future prices
5. Number of sellers |
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Definition
| Input prices and supply move curve |
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| How would an increase in the price of leather (an input) affect the supply of shoes? |
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| the production process of changing resources into goods and services. when technology improves supply increases. |
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| taxation and supply move opposite |
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| Expectations of Future Prices |
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Definition
| Expected future price changes ad current supply move opposite |
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--the allocation of goods among consumers using prices
--economist believe that price rationing is the most efficient method of allocating goods and services
--Every consumer willing to pay at least the equilibrium price will get to have the good. |
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| Consequences of Price Ceiling |
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Definition
1. shortages
2. Inefficient allocation among consumers
3. Wasted resources
4. Low Quality |
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| Consequences of Price Floor |
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Definition
1. Surpluses
2. Inefficient allocation among producers
3. Wasted resources
4. protection from inputs |
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| --.Price controls have NO effect on the market price if they are not set properly |
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| Willingness to pay - amount paid |
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| the maximum price at which a consumer will buy a good. |
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| amount received - willingness |
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| the minimum price at which a producer will sell a good. |
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