Term
|
Definition
| the economic observation that humans have unlimited wants but only limited resources |
|
|
Term
|
Definition
| The study of how society manages scarce resources |
|
|
Term
|
Definition
| Claim that attempts to describe the world as it is |
|
|
Term
|
Definition
| Claim that attempts to describe how the world should be |
|
|
Term
|
Definition
| A set of institutional arrangements to determine how to distribute the scare resources to satisfy people's wants |
|
|
Term
|
Definition
Government owns most of the resources and a central planning board of some kind decides how the resources will be used
1. Incentive Problem
2. Coordination Problem |
|
|
Term
|
Definition
Resources are privately owned and goods are privately produced according to a profit motive
1.Extensive property rights
2. Freedom of enterprise and choice
3. Self-interest as a primary motivating force
4. Competition
5. Existence of markets and prices
6. Active but limited government |
|
|
Term
| Assumptions about Consumers |
|
Definition
1. People are rational
2. People have unlimited wants
3. People have limited income |
|
|
Term
|
Definition
| If people know what they want and how to get it, they will try to obtain it if the benefits exceed the costs given their information. |
|
|
Term
|
Definition
| All other things being equal, as the price for a good does up, demand for that good does down. |
|
|
Term
| Reasons a Demand Curve Can shift |
|
Definition
1. Change in income
2. Price of a related good changes
3. Tastes/preferences
4. Expectations about the economy
5. Number of buyers changes |
|
|
Term
|
Definition
1. Firms act to maximize profits
2. Firms produce goods with a technology that requires resources
3. Resources are limited |
|
|
Term
|
Definition
| All other things being equal, as the price of a good increases, the supply of that good increases. |
|
|
Term
| Reasons a supply curve may shift: |
|
Definition
1. Change in input prices
2. Change in technology
3. Change in expectations
4. Number of sellers |
|
|
Term
|
Definition
| A ________ is created when a group of buyers and sellers of a particular good or service come together and trade. |
|
|
Term
|
Definition
| a price and a quantity such that at that price quantity demanded equals quantity supplied. |
|
|
Term
|
Definition
| The measure of how much buyers and sellers respond to a change in prices |
|
|
Term
|
Definition
| The measure of how much buyers and sellers respond to a change in prices |
|
|
Term
|
Definition
| The measure of how much buyers demand changes in response to a change in their income |
|
|
Term
|
Definition
| Quantity responds "substantially" to a change in price |
|
|
Term
|
Definition
| Quantity responds"only slightly" to changes in price |
|
|
Term
Midpoint Method
(Elasticity equation)
|
|
Definition
(Q2-Q1)/(Q2+Q1) * (P2+P1)/(P2-P1)
|elasticity| >1 = elastic
|elasticity| < 1 = inelastic |
|
|
Term
|
Definition
|
|
Term
|
Definition
| The study of how the allocation of resources affects economic well-being |
|
|
Term
|
Definition
| The property of a resource allocation of maxmizing the total surplus recieved by all members of society (ensure that there is "no waste") |
|
|
Term
|
Definition
| Resource allocation that distributes economic prosperity uniformly amongst all members of society |
|
|
Term
|
Definition
| What a consumer gets beyond what the consumer is willing to pay |
|
|
Term
|
Definition
| Difference between price recieved and what the producer was willing to recieve |
|
|
Term
|
Definition
| A market is ____ if total surplus is the highest it can possibly be |
|
|
Term
|
Definition
| Sum of surplus recieved by all members of society |
|
|
Term
Gross Domestic Product
(GDP) |
|
Definition
The market value of final goods and services produced within the borders of a given country within a given period of time
"Total amount of $ spent in the economy"
|
|
|
Term
|
Definition
| The revenue firms recieve from selling their products at the price the buyer and seller agree on |
|
|
Term
|
Definition
| A good used entirely to produce another good |
|
|
Term
|
Definition
| Any food that is not an intermediate good |
|
|
Term
| Goods not included in GDP |
|
Definition
1. Intermediates
2. Land of Inventories of Goods
3. Used Goods
4. Informal Production/Home production |
|
|
Term
Components of GDP
(equation) |
|
Definition
|
|
Term
|
Definition
| GDP calculated using current market prices |
|
|
Term
|
Definition
| GDP calculated using market prices in a base year |
|
|
Term
|
Definition
|
|
Term
|
Definition
(GDP deflator in year 2 - GDP deflator is year 1)
GDP deflator for year 1 |
|
|
Term
|
Definition
| the increase real GDP per capita over time |
|
|
Term
Growth Policies
Human Capital - Education, Health and Nutrition |
|
Definition
-Increase education = increased skills
Improve healther & nutrition of workers |
|
|
Term
Growth Policies
Property Rights and Political Stability |
|
Definition
Gives you incentive to invest because you know you will see the gain
efficient financial institution = easy to get loan = easy to start a business |
|
|
Term
Growth Policies
Free Trade |
|
Definition
-Increases efficieny by allowing specialization
-Increases demand for goods
-Increases foreign investment |
|
|
Term
Growth Policies
Patents and Copyrights |
|
Definition
-Gives corporations incentives to do research ... but you are creating a monopoly
-Increase innovation
-Increase monopolies |
|
|
Term
Government Roles in Economy
Regulator |
|
Definition
1. Provide and enforce legal structure
2. Maintain competition
3.Promote stability |
|
|
Term
Government Role in Economy
Equalizer |
|
Definition
1. Providing public goods/services
2. Redistribute income
3. reallocate resources |
|
|
Term
| People not in labor force |
|
Definition
1. Under 16 and anyone who is institutionalized
2. Not employed (people who choose not to have a job)
-retirees
-students
-house spouses |
|
|
Term
|
Definition
| People with some kind of job |
|
|
Term
In labor force:
Unemployed |
|
Definition
| People who are willing and able to work who are actively looking for a job |
|
|
Term
|
Definition
Some one who has given up looking for a job because they don't think that they can find one
"not employed" |
|
|
Term
|
Definition
| the # unemployed / # of people in labor force x100 |
|
|
Term
|
Definition
| Sum of employed and unemployed |
|
|
Term
|
Definition
| What percentage of population that is part of the labor force |
|
|
Term
|
Definition
| "search and wait" - type of unemployment caused by workers taking time to find a job that matches their skills and tastes |
|
|
Term
|
Definition
| Type of unemployment caused by workers whose skills are not in demand by employees or who lack sufficient skills to obtain employment or who cannot move to locations where jobs are available |
|
|
Term
| Natural Rate of Unemployment |
|
Definition
The rate of unemployment around which the unemployment rate fluctuates
(in USA between 4% and 7%) |
|
|
Term
|
Definition
Government pays you $ while unemployed
-Will lengthen unemployment by making it less costly to by unemployed |
|
|
