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31 terms

Microeconomics Ch 3-4

STUDY
PLAY
principle of opportunity cost
the opportunity cost of something is what you sacrifice to get it
comparative advantage
the ability of one person or nation to produce a good at a lower opportunity cost than another person or nation
absolute advantage
the ability of one person or nation to produce a product at a lower resource cost than another person or nation
import
a good or service produced in a foreign country and purchased by residents of the home country (for example, the US)
export
a good or service produced in the home country (for example, the US and sold in another country)
market economy
an economy in which people specialize and exchange goods and services in markets
centrally planned economy
an economy in which a government bureaucracy decides how much of each good to produce, how to produce the good, and who gets the good
market failure
happens when a market doesn't generate the most efficient outcome
quantity demanded
the amount of a product that consumers are willing and able to buy
demand schedule
a table that shows the relationship between the price of a product and the quantity demanded, ceteris paribus
individual demand curve
a curve that shows the relationship between the price of a good and quantity demanded by an individual consumer, ceteris paribus
law of demand
there is a negative relationship between price and quantity demanded, ceteris paribus
change in quantity demanded
a change in the quantity consumers are willing and able to buy when the price changes; represented graphically by movement along the demand curve
market demand curve
a curve showing the relationship between price and quantity demanded by a ll consumers, ceteris paribus
quantity supplied
the amount of a product that firms are willing and able to sell
supply schedule
a table that shows the relationship between the price of a product and quantity supplied, ceteris paribus
individual supply curve
a curve showing the relationship between price and quantity supplied by a single firm, ceteris paribus
law of supply
there is a positive relationship between price and quantity supplied, ceteris paribus
change in quantity supplied
a change in the quantity firms are willing and able to sell when the price changes; represented graphically by movement along the supply curve
marginal principle
increase the levee of an activity as long as its marginal benefit exceeds its marginal cost. Choose the level at which the marginal benefit equals the marginal cost.
market supply curve
a curve showing the relationship between the market price and quantity supplied by all firms, ceteris paribus
minimum supply price
the lowest price at which a product will be supplied
market equilibrium
a situation in which the quantity demanded equals the quantity supplied at the prevailing market price
excess demand
a situation, in which, at the prevailing price, the quantity demanded exceeds the quantity supplied
excess supply
a situation in which the quantity supplied exceeds the quantity demanded at the prevailing price
change in demand
a shift of the demand curve caused by a change in a variable other than the price of the product
normal good
a good for which an increase in income increases demand
inferior good
a good for which an increase in income decreases demand
substitues
two goods for which an increase in the price of one good increases the demand for the other good
complements
two goods for which a decrease in the price of one good increases the demand for the other good
change in supply
a shift of the supply curve caused by a change in a variable other than the price of the product