WSC Economics Words Chp.1

118 terms by hansoneh 

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Economics

the study of choices

opportunity cost

the cost of any choices you make

trade-off

doing one or the other

Inflation

when the same amount of money buys less today than a year ago

Rational self interest

the little economist inside you that motivates you to what is best for you

Economic Analysis

comparing the choices you can make and asking yourself if it is good

Fundamentals of economics

the basics ex. supply and demand

Microeconomics

the local decisions you make ex. will I buy coke or sprite

Macroeconomics

the larger choices people make ex. how strong an entire economy is or How will Taiwan grow

model

in the economic sense describes how things normally behave and allow us to make predictions about them

Butterfly Effect

chain reaction

Social Science

use experiments and logic to answer questions about societies
ex. economics

ceteris paribus

a principle that means in economics we only think about one thing changing at a time, in latin means "all else held equal"

Basic Economic Problem

things are scarce (not common)

scarcity

a belief economists have, that the world will always want something(unlimited wants) and that the world only has limited resources

rationally

making the best possible choice at any given time (what economics assumes we do)

free goods

resources that seem to be available in sufficient amounts to anyone who wants them

cost

what we pay for something (except for free goods)

accounting cost

the amount of money we spend on something

economic cost

the measure of accounting cost,opportunitycost,environmental impact,time,travel,social ramifications added together = VERY EXPENSIVE

Production Possibilities

the combinations of merchandise that could be made

Production Possbilities Frontier

the graph that showsall the combinations of two goods that a producer or country can output at a given time

inefficient

fail to employ all available resources

efficient

using all the available resources

law of increasing opportunity costs

the law that states: the more you make of one good the greater the opportunity cost becomes

Pareto efficiency

when you can't make anyone better off without making somebody else worse off

factors of production

Natural Resources: land and anything found in nature (paid with RENT)
Capital: tools and machinery (paid with INTEREST)
Labor: human resource (paid with WAGES)
Entrepreneurship: risk takers, business people (paid with profit)

intermediate goods

natural rsources processed in a new form ex. A Coal mine is land but mined coal is capital

interest

what producers pay for the use of capital

human capital

what makes a the quality of the human resource better ex. education,experience,skills and other training

cost-benefit analysis

when a person wieghts how much they would lose to how much they could gain

sunk costs

costs that cannot be avoided

Marginal Decision-Making

the act of wieghing the benefits of an increasing production of a good (that good is AT THE MARGINS) against its costs

marginal benefit

the added profit from the sale of one more unit

marginal cost

the expense of producing one more unit

Diminishing Marginal Utility

as we get more of a good or service, the less value we give each additional unit of it

Utility

the satisfaction a person abtains from consuming a good or service

Marginal Utility

the satisfaction obtained from one more of that good or service

Total Utility

the sum of all the satisfaction someone obtains from however many of that good or service he consumes

utils

the imaginary units that expresses utility

MU/P

the ratio of marginal utility to price

social loafing/shirking

when you contribute a bit less to a project hoping that the rest of your team will pick up the slack

groupthink

a condition in which everyone agrees to a bad decision because they are blinded by its popularity (often happens during the scholars bowl)

positive economics

factual economics unbiased statements of theory

normative economics

opinionated, subjective economics (can niether be proved or dissproved by facts)

traditional economy

where you rely on what has been done in the past to decide what is done today

pure market economy

where all economic resources are owned by private companies and there is no government intervention

planned economy

where all land is publically owned and a single central authority makes all decisions ex. North Korea

command economy

when the authority has absolute power and makes all the decisions

mixed market economy

where you promote private enterprise but the government intervenes to help achieve certain goals ex. lowering unemployment

positive incentive

a reward for behavior meant to encourage that behavior ex. giving candy in multra class

negative incentive

punishment for undesirable behavior ex. running laps

monetary

a interest in gain that has to do with money

non-monetary

interest in gain that does not have to do with money like family,love and glory

Economic Freedom

characteristic of a mixed market economy, where the people can decide which goods and services they consume and produce and at what prices

Private Property

characteristic of a mixed economy, where businesses,land and homes are owned by an individual and decisions are made by the individual who own the property

Economic Incentives

characteristic of a mixed economy,allows people who work hard to earn more money

Competitive Markets

characteristic of a mixed economy, where producers compete for customers causing lower prices and better goods

Limited Role of Government

characteristic of a mixed economy, where the government does not really interfere

exchange

trading one thing for another

voluntary exchange

when you trade one thing for another because you want it ex. trading money for Dr. Pepper or A&W Root Beer *BOTH parties in such an exchange expect to GAIN

Barter

a type ofvoluntary exchange where resources, goods or services are exchanged NOT MONEY

double coincidence of wants

the only way a barter system works YOU MUST HAVE WHAT I WANT AND YOU MUST WANT WHAT I HAVE

Medium of Exchange

something that is accepted by anyone, anytime like MONEY eliminates the barter system

balance of trade

indicates whether a country is importing or exporting more and by how much

trade deficit

importing more than you export

trade surplus

exporting more than you import

trade barriers

restrictions on trade

tariff

taxes on imports

quota

a limit on how much of a good can be imported

embargo

limits imports to zero ex. bay of pigs

Law of Demand

The quantity demanded of any good or service INCREASES as the price of the good or service DECREASES

demand schedule

shows the quantities of a good or service consumers are willing and able to buy at different prices

demand curve

when you plot a demand schedule on a graph IF A PRICE CHANGES THERE IS MOVEMENT along THE CURVE. if demand changes there is MOVEMENT OF THE CURVE

Income Effect

if a good's price falls,people buying it are left with more money to spend, the price decrease feels like an income increase

substitution effect

as a good'd price falls, consumers choose it over other goods

Normal Good

when the demand for a good increases when consumer income increases

Inferior Good

when the demand for a good decreases when the consumer income increases

Luxury good

demand increases for these goods as the consumer's income increases except when then income increases the percent of the consumer's income is spent on said goods

The Theory of Rational Expectations

CURRENT DEMAND WILL ALWAYS DECREASE ID CONSUMERS EXPECT PRICES WILL BE LOWER IN THE FUTURE***** current demand will always increase if consumer expect prices will be higher in the future

substitute good

goods that consumers are willing to use in place of another

complementary good

goods that are associated together because they are consumed together ex Peanut Butter and Jelly

Seasonal goods

goods where the demand is higher in a certain season ex.ice cream or hot chocolate

Law of supply

as the price goes up so does the supply

Supply schedule

shows the various quantities of a good or service that producers are able and willing to produce and sell within a range of prices

market equilibrium

the point of intersection on the supply and demand curves

market clearing price

equilibrium price

Clearing quantity

equilibrium quantity

exchange price

selling price

exchange quantity

the amount demanded or supplied at the exchange price

consumer surplus

when you would pay more than what you actually paid

producer surplus

when due to competition you can sell an item for more than your bottom amount

price floor

the least amount at which something can be sold

price ceiling

the most amount at which something can be sold

black market

an illegal, unreported market for goods and services

indifference curves

a graph which displays all the combinations of two goods that bring you the same utility

marginal rate of substitution

the amount of one good you would give up for one more of the other at any point on the indifference curve

budget line

the line on a graph which shows what you can afford

tangent

in math, a line that touches a curve at only one point is (fill in word here) to that curve

elasticity

how responsive one variable is to changes in another

Price elasticity of Demand (PED)

% change in quantity demanded / % change in price

price elastic

the percent changes in the quantity demanded is greater than the percent change in price

price inelastic

the percent change in quantity demanded is less that the percent change in price

unit elastic

when PED is 1

perfectly elastic

if any increase in price leads to a decrease of quantity demanded to zero

perfectly inelastic

when a change in price has no effect on the quantity demanded

uniformity of the product

how different the product is based on who makes it

perfect competition

where everyone charges the same price for the same good

perfect information

equal and free access to knowledge about the price and availability of the product and about other buyers

price takers

firms in perfect competition that take their prices from the market

Monopolistic competition

where the products are all similiar but each seller tries to convince the customer that their wares are unique

product differentiation

the way sellers make their products seem better

Oligopoly

where there are only a few large sellers and many buyers

Natural Barriers to Entry

when economics of scale favor a firm that already has infastructure and consumers to realize the savings of large scale production

Artificial Barriers to Entry

patents,government regulations and import quotas

kinked demand curve

a graph that shows when one firm lowers it's prices everyone follows suit but if another firm raises it's prices nobody follows and that firm either runs out of business or lowers it's prices

monopoly

there is only one seller of a good with no close substitutes

natural monopolies

develope in markets with high capital investment costs

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