Microeconomics Ch 3-4
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31 terms
Terms | Definitions |
|---|---|
 principle of opportunity cost | the opportunity cost of something is what you sacrifice to get it |
| comparative advantage | the ability of one person or nation to produce a good at a lower opportunity cost than another person or nation |
| absolute advantage | the ability of one person or nation to produce a product at a lower resource cost than another person or nation |
| import | a good or service produced in a foreign country and purchased by residents of the home country (for example, the US) |
| export | a good or service produced in the home country (for example, the US and sold in another country) |
| market economy | an economy in which people specialize and exchange goods and services in markets |
| centrally planned economy | an economy in which a government bureaucracy decides how much of each good to produce, how to produce the good, and who gets the good |
| market failure | happens when a market doesn't generate the most efficient outcome |
| quantity demanded | the amount of a product that consumers are willing and able to buy |
| demand schedule | a table that shows the relationship between the price of a product and the quantity demanded, ceteris paribus |
| individual demand curve | a curve that shows the relationship between the price of a good and quantity demanded by an individual consumer, ceteris paribus |
| law of demand | there is a negative relationship between price and quantity demanded, ceteris paribus |
| change in quantity demanded | a change in the quantity consumers are willing and able to buy when the price changes; represented graphically by movement along the demand curve |
| market demand curve | a curve showing the relationship between price and quantity demanded by a ll consumers, ceteris paribus |
| quantity supplied | the amount of a product that firms are willing and able to sell |
| supply schedule | a table that shows the relationship between the price of a product and quantity supplied, ceteris paribus |
| individual supply curve | a curve showing the relationship between price and quantity supplied by a single firm, ceteris paribus |
| law of supply | there is a positive relationship between price and quantity supplied, ceteris paribus |
| change in quantity supplied | a change in the quantity firms are willing and able to sell when the price changes; represented graphically by movement along the supply curve |
| marginal principle | increase the levee of an activity as long as its marginal benefit exceeds its marginal cost. Choose the level at which the marginal benefit equals the marginal cost. |
| market supply curve | a curve showing the relationship between the market price and quantity supplied by all firms, ceteris paribus |
| minimum supply price | the lowest price at which a product will be supplied |
| market equilibrium | a situation in which the quantity demanded equals the quantity supplied at the prevailing market price |
| excess demand | a situation, in which, at the prevailing price, the quantity demanded exceeds the quantity supplied |
| excess supply | a situation in which the quantity supplied exceeds the quantity demanded at the prevailing price |
| change in demand | a shift of the demand curve caused by a change in a variable other than the price of the product |
| normal good | a good for which an increase in income increases demand |
| inferior good | a good for which an increase in income decreases demand |
| substitues | two goods for which an increase in the price of one good increases the demand for the other good |
| complements | two goods for which a decrease in the price of one good increases the demand for the other good |
| change in supply | a shift of the supply curve caused by a change in a variable other than the price of the product |
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