the study of how indidivudals and societies make choices about ways to use scarces resources to fulfill their wants.
everything other than basic survival needs.
condition of not being able to have all of the goods and services one wants, because wants exceed what can be made from all available resources at any given time.
Factors of production
resources of land, labor, and entrepreneurship used tp produce goods and services.
(factor of production)-natural resources and surface land and water
(factor of production)-human effort directed toward producing goods and services
tangible objects that can satisfy people's wants or needs
actions that can satisfy people's wants or needs
(factor of production)-previously manufactured goods used to make other goods and services.
the amount of output (goods and services) that results from a given level of inputs (land, labor, capital, entrepreneurship
(factor of reproduction)-ability of risk taking individuals to develop new products and start new businesses in order to make profits.
(some consider to be factor of production)-advance in knowledge leading to new and improved goods and services and better ways of producing them.
sacrifcing one good or service to purchase or produce another.
value of the next best alternative given up for the alternative that was chosen
production possibilities curve
graph showing the maximum combinations of goods and services that can be produced from a fixed amount of resources in a given period of time.
the branch of economic theory that deals with behavior and decision making by small units such as individuals and firms.
the branch of economic theory dealing with the economy as a whole and decision making by large units such as governments
the production and distribution of goods and services in a society.
a theory or simplified representation that helps explain and predict economic behavior in the real world.
an assumption involving two or more variables that must be tested for validity.
the amount of a good or service that consumers are able and willing to buy at various possible prices during a specifed time period
the amount of a good or service that producers are able and willing to sell at various prices during a specified time period.
the process of freely exchanging goods and services between buyers and sellers.
(basis of activity in a merket economy)-a transaction in which a buyer and a seller exercise their economic freedom by working out their own terms of exchange.
the law of demand
as price goes up, quantity demanded goes down; as price goes down, quantity demanded goes up.
the amount of a good or service that a consumer is willing and able to purchase at a specific price.
real income effect
economic rule stating that individuals cannot keep buying the same quantity of a product if its price rises while their income stays the same.
economic rule stating that if two items satisfy the same need and the price of one rises, people will buy the other.
(or satisfaction)-the ability of any good or service to satisfy consumer wants.
an additional ammount of satisfaction
the law of diminishing marginal utility
the rule stating that the additional satisfaction a consumer gets from purchasing one more unit of product will lessen with each additional unit purchased.
table showing the quantities demanded at different possible prices
downward sloping line that shows in graph form the quantities demanded at each possible price.
determinants of demand
change in population; changes in income; changes in tastes and preferences; substitutes; complementary goods
a product often used with another ptoduct
economic concept dealing with consumers' responsiveness to an increase or decrease in price of a product.
price elasticity of demand
economic concpet that deals with how much demand varies according to changes in price.
situation in which the rise or fall in a product's price greatly affects the amount that people are willing to buy.
situation in which a product's price change has little impact on the quantity demanded by comsumers.
determinants od pricw elasticity
the existence of substitutes; the percentage of a person's total budget devoted to the purchase of that good; and the time consumers are given to adjust to the change in price.
the ability and willingness of producers to provide goods and services at different prices in the marketplace.
the law of supply
as the price rises for a good, the quantity supplied generally rises; as the price falls for a good, the quantity supplied also falls.
the amount of a good or service that a producer is willing and able to supply at a specific price.
table showing quantities supplied at different possible prices.
an upward-sloping line that shows in graph form the quantities supplied at each possible price.
determinants of supply
price of inputs; number of firms; taxes; and technology
any use of land, labor, and capital that produces goods and services more efficiently
law of diminishing returns
economic rule that says as more units of a factor of production (such as labor) are added to other factors of production (such as equipment) after some point total output continues to increase but at a diminishing rate.
the price at which the amount producers are willing to supply is equal to the amount consumers are willing to buy
situation in which the quantity demanded is greater than the quantity supplied at the current price.
situation in which quantity supplied is greater than quantity demanded at the current price.
a legal maximum price that may be charged for a particular good or service.
the distribution of goods and services based on something other than price (i.e. limiting items that are in short supply)
"underground" or illegal market in which goods are traded at prices above their legal maximum prices or in which illegal goods are sold.
a legal minimum price below which a good or service may not be sold.
national income accounting
measurement of the national economy's performance, dealing with the overall economy's output and income.
gross domestic produce (GDP)
total dollar value of all final goods and services produced in a nation in a single year.
goods and services bought by consumers for their direct use.
business purchases of tools, machines, buildings, etc. to produce other goods.
goods and services bought by federal, state, and local governments.
difference between what the nation sells to other countries and what it buys from other countries.
loss of value because of wear and tear to durable goods and capital goods.
net domestic product (NDP)
value of the nation's total output (GDP) minus the total value lost through depreciation on equipment.
total income earned by everyone in the economy
personal income (PI)
total income that individuals receive before personal taxes are paid.
welfare and other supplementary payments that a state or the federal government makes to individuals.
disposable personal income (DI)
income remaining for people to spend or save after all taxes have been paid.
prolonged rise in the general price level of goods and services.
the real goods and services that money can buy; determines the value of money.
prolonged decline in the general price level of goods and services.
consumer price index (CPI)
measure of the change in price over time of a specific group of goods and services used by the average household.
representative group of goods and services used to compile the consumer price index.
year used as a point of comparison for other years in a series of statistics
producer price index (PPI)
measure of the change in price over time that the United States producers charge for their goods and services.
GDP price deflator
price index that removes the effect of inflation from GDP so that the overall economy in one year can be compared to another year.
GDP that has been adjusted for inflation by applying the price deflator.
summation of all individual parts in the economy.
total quantity of goods and services in the entire economy that all citizens will demand at any single time.
aggregate demand curve
a graphed line showing the relationship between the aggregate quantity demanded and the average of all prices as measured by the implicit GDP price deflator.
real domestic output of producers based on the rise and fall of the price level.
aggregate supply curve
a graphed line showing between the aggregate quantity supplied and the average of all prices as measured by the implicit GDP price deflator.
ups and downs in an economy
irregular changes in the level of total output measured by real GDP
period of prosperity in a business cycle in which economic activity is at its highest point.
part of the business cycle during which economic activity is slowing down.
part of the business cycle in which the nation's output (GDP) does not grow for at least six months
major slowdown of economic activity.
lowest part of the business cycle in which the downward spural of the economy levels off.
part of the business cycle in which economic activity slowly increases.
inventions and new production techniques.
statistics that measure variables in the economy
statistics that point to what will happen in the economy
economic indicators that usually change at the same time as changes in overall business activity
indicators thaat seem to lag behind changes in overall business activity.