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Economics -- Midterm Review
Terms in this set (51)
There are fewer resources than are needed to fill human wants and needs.
An economic system in which people choose freely what to buy and sell
An economic system in which the government makes all economic decisions.
Goods and services are produced the way it has always been done
a mixing together of market and command systems
individuals have economic freedoms
government retains some control for benefit of citizens
Factors of Production
Land, Labor, and Capital
Determinants of Demand
Determinants of Supply
Cost of Production
Amount of Sellers
Graphic representation of the relationship between product price and quantity of product that a seller is willing and able to supply.
Graphic representation of the relationship between product price and the quantity of the product demanded.
Supply is greater than demand, or supply exceeds demand.
Demand is greater than supply, or demand exceeds supply.
Market clearing price/Price Equilibrium
the price of a good or service at which quantity supplied is equal to quantity demanded
a government-imposed price control or limit on how high a price is charged for a product. Governments intend price ceilings to protect consumers from conditions that could make commodities prohibitively expensive.
A price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product. A price floor must be higher than the equilibrium price in order to be effective.
Increase in Demand
Demand curve shifts to the right
Increase in Supply
Supply curve shifts to the right
Decrease in Demand
Demand curve shifts to the left
Decrease in Supply
Supply curve shifts to the left
This is the benefit that you have given up in order to pursue an alternative
the system that society uses to produce and distribute goods and services
any good for which demand increases when income increases
A type of good for which demand declines as the level of income or real GDP in the economy increases.
is the amount of a good or service that can be produced in a given time
Government spending. Major areas of federal spending are social services and national defense.
Idea that government should play as small a role as possible in economic affairs.
The money a government collects from taxes or other sources
Consumer willingness and ability to buy products at a given price.
Law of Demand
the law of demand states that,"conditional on all else being equal, as the price of a good increases, quantity demanded decreases; conversely, as the price of a good decreases, quantity demanded increases
Law of Supply
The law of supply is a fundamental principle of economic theory which states that, other factors held constant, an increase in price results in an increase in quantity supplied. In other words, there is a direct relationship between price and quantity: quantities respond in the same direction as price changes
Cost of the next best alternative use of money, time, or resources when one choice is made rather than another
one more or one less unit
diminishing marginal utility
Decreasing satisfaction or usefulness as additional units of a product are acquired
Ability or capacity of a good or service to be useful and give satisfaction to someone.
double coincidence of wants
two traders are willing to exchange their products directly
The sacrifice of some or all of one economic goal, good, or service to achieve some other goal, good, or service.
a positive or negative environmental stimulus that motivates behavior
A government payment that supports a business or market
an economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume
Power of a government to take private property for public use in exchange for compensation
a commodity or service that is provided without profit to all members of a society, either by the government or a private individual or organization. Shared and non-excludable
a person who receives the benefit of a good but avoids paying for it
the demand by all the consumers of a given good or service
factors of production
land, labor, capital, entrepreneurship (CELL)
a table that shows the relationship between the price of a good and the quantity demanded
a table that shows the relationship between the price of a good and the quantity supplied
Economic system in which individuals and businesses are allowed to compete for profit with a minimum of government interference
term economists use to describe the self-regulating nature of the marketplace
a group of buyers and sellers of a particular good or service
Economic Goals of Society
efficiency, freedom, security, equity, growth, stability
An economy in which production is based on customs and traditions and economic roles are typically passed down from one generation to the next.
Recommended textbook explanations
Principles of Economics
N. Gregory Mankiw
William A. McEachern
Explorations in Economics
N. Gregory Mankiw
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