Econ Vocab Part 1
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25 terms
Terms | Definitions |
|---|---|
 Economics | the study of how studies use scarce resources to produce goods and distribute them among different people |
| Scarce Good | A good which is in limited supply |
| Microeconomics | the study of the behavior of individual decision makers |
| Macroeconomics | the study of behavior of the economy as a whole |
| Positive Economics | type of economics which focuses on studying facts that can be verified or disproved. Investigates "the way things are" |
| Normative Economics | type of economics which makes value judgments. Investigates "the way things ought to be" |
| The main factors of production | land, labor, capital |
| Capital goods | durable goods that are used to make other goods |
| Production Possibilities Frontier | the curve which shows the maximum amounts of production possible, given the state of technology and the quantity of inputs. |
| Productive Efficiency | when the economy cannot produce more of one good without producing less of another good; the economy is on its PPF |
| Opportunity Cost | the value of the forgone opportunity; what one has to give up in order to take a specific option |
| The Invisible Hand | the idea that individual pursuit of self-interest leads to positive outcomes for society as a whole, through markets |
| Perfectly competitive market | market where no one agent or small group of agents is large enough to affect the price of the good |
| Externality | an uncompensated cost or benefit of an action; a positive/negative side effect of producing a good |
| Public Goods | goods whose benefits are spread among the entire community |
| Non-exclusionary goods | goods where no one can be excluded from consumption of that good, whether they paid for it or not |
| Law of Demand | quantity demanded decreases as price increases |
| Substitutes | goods that compete with one another |
| Complements | goods that go together |
| Law of Supply | quantity supplied increases as price increases |
| Price elasticity of demand | a measure of sensitivity of the quantity demanded to changes in price |
| Price elasticity of supply | a measure of the sensitivity of the quantity supplied to changes in price |
| Elastic | when the elasticity of demand or supply is greater than 1 |
| Inelastic | when the elasticity of demand or supply is less than 1 |
| Tax Incidence | the ultimate effect of a tax on the real incomes of producers or consumers (depends on the price elasticities of supply and demand) |
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