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118 terms

WSC Economics Words Chp.1

STUDY
PLAY
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