Microeconomics Ch 3-4

31 terms by cl2423

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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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