Macroeconomics Test 1
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22 terms
Terms | Definitions |
|---|---|
 Scarcity | The lack of resources to produce enough goods to satisfy everyone's wants or needs |
| Factors of Production | Land, Labor, Capital, Entrepreneurship |
| Land | Factor of Production--Ground and resources contained within |
| Labor | Factor of Production--Number of workers and skill set |
| Capital | Factor of Production--Goods used to produce something else(technology, equipment) |
| Entrepreneurship | Factor of Production--How the other 3 factors are used together to create the final product |
| 3 Economics Questions | What to produce, How to produce, For Whom to produce |
| Positive Statement | Statements of fact without opinon |
| Normative Statement | Statements disguised as opinions, look out for 'should'. |
| Opportunity Costs | The cost of one action due to the giving up of another(ex: going to a football game instead of studying). |
| Marginal Cost | The cost of producing one more unit or good |
| Production Possibilities Frontier | A graph comparing the relative cost of producing one good by considering the opportunity cost of another. |
| Demand | The willingness and ability to buy specific quantities of a good at alternative prices in a given period of time, ceteris paribus |
| Supply | The ability and willingness to sell(produce) specific quantities of a good at alternative prices in a given time period, ceteris paribus |
| Law of Demand | a change in price will result in quantity demanded changing in the opposite direction |
| Equilibrium | The point at which the demand and supply curves/lines cross; leads to no shortage of surplus and maximizes overall profits |
| Price Ceiling | Government imposed price maximum that cannot be crossed by suppliers(producers). |
| Price Floor | Government imposed price minimum that cannot be crossed by suppliers(producers) |
| Market Mechanism | The use of market prices and sales to signal desired outputs(or resource allocations) |
| Market Failure | An imperfection in the market mechanism(ex: price ceiling/floor) that prevents optimal outcomes |
| Externalities | Costs(or benefits) of a market activity borne by a third party; the difference between the social and private costs(benefits) of a market activity |
| Effect of Externalities | The presence of externalities(taxes, tax rebates, ect) remove prices from being a valid measure of a good's societal value. |
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