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Negative externality

An adverse side effect of an act that is felt by others

positive externality

A beneficial side effect of an act that is felt by others

law of diminishing marginal utility

A law stating that as a person consumes additional units of a good, the utility gained from each additional unit of the good decreases

law of demand

a law stating that as price of good increases, quantity demanded of good decreases and vice-versa

Normal Good

A good for which the demand rises as the income rises (luxuries, not necessities)

Inferior Good

A good for which the demand falls as income rises (crappy things i.e. hotdogs not steaks)

neutral good

Income does not effect the consumption of these goods (necessities)

Elasticity of Demand

The relationship between the percentage change in quantity demanded and percentage change in price

Elastic Demand

The type of demand that exists when the percentage change in quantity demanded is greater than the percentage change in price

Inelastic demand

the type of demand that exists when the percentage change in quantity is less than the percentage change in price

Unit-Elastic Demand

The type of demand that exists when the percentage change in quantity demanded is the same in percentage change of price

Law of Supply

A law stating that as the price of a good increases, the quantity supplied of a good increases and vice-versa

Elasticity of Supply

The relationship between the percentage change in quantity supplied and the percentage change in price

Elastic Supply

The type of supply that exists when the percentage change in quantity supplied is greater than the percentage change in price

Inelastic Supply

The type of supply that exists when the percentage change in quantity supplied is less than the percentage change in price

Law of Diminishing Marginal Returns

A law that states if additional units of one resource are added to another resource in fixed supply, eventually the additional output will decrease (If we hire more workers, eventually the output from each worker will be less)

Perfectly Competitive Market

A market that: 1) Many buyers and sellers 2) All firms selling identical goods 3) All info on buying and selling available to buyers and sellers 4) easy entry and exit EX) wheat, corn, stocks

Monopolistic Market

A market that: 1) has a single seller 2) sale of product has no close substitues 3) extremely high barriers to entry EX) Last Gas station for 200 miles, water, electricity, first class mail

Monopolistic Competitive Market

A market that: 1) many buyers and sellers 2) The production and sale of slightly differentiated products 3) Easy entry and exit EX) Clothing, meals at Restaurants

Oligopolistic Market

A market that: 1) Has few sellers 2) Production of either identical or slightly differentiated 3) Significant Barriers to entry EX) Cars, cereal, airlines

aggregate demand curve

A curve that shows the quantity of goods and services that buyers are willing and able to buy at different price levels

aggregate supply curve

A curve that shows the quantity of goods and services that producers are willing and able to produce at different price levels

open market operations

Buying and selling of Government securities by the fed (Buying increases $ supply, selling decreases)

discount rate

The intrest rate the fed charges banks (If fed raises, $ supply decreases and vice-versa)

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