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24 terms

Brue, McConnel, & Flynn --Ch. 1-5

STUDY
PLAY
economics
the study of making choices when unlimited wants conflict with a limited amount of resources
opportunity cost
the next best opportunity forgone
marginal analysis
the comparison of marginal benefits and marginal costs for decision making
other-things-equal assumption
assumption that factors other than those being considered don't change
microeconomics
concerned with individual units
macroeconomics
concerned with economy as a whole
budget line
line that shows various combinations of two products a consumer can purchase with a specific money income, given the products' prices
the four factors of production and returns?
land --> rent, labor --> wages, capital --> interest, and entrepreneurial ability --> profit
capital
man-made goods (not money)
production possibilities curve
curve that shows the different combinations of goods and services that can be produced in a full economy
law of increasing opportunity costs
as opportunity cost increases, the amount that consumers are willing and able to by decreases
what is optimal output?
Marginal Benefit = Marginal Cost!
economic growth
outward shift of the production possibilities curve from an increase in resources or quality of tech
economic expansion
when the economy is utilizing its resources and tech efficiently
capitalism/market system
resources are privately owned and there is decentralized decision making
why use money?
it facilitates trade when wants do not coincide
consumer sovereignty
consumers determine the types and quantities of goods and services will be produced with the economy's resources
demand
the relationship between price and quantity such that for each and every price is depicted the quantity of goods/services that consumers are willing and able to buy
what are the shift factors or demand?
size of the market, income, price of other goods, tastes/preferences
shift factors of supply?
price of input and level of technology
elasticity
a measure of the responsiveness of the quantity of a product demanded by the consumers when the price changes
determinants of elasticity?
substitutability, proportion of income, luxury, time, higher price
coase theorem
the idea that externality problems can be resolved through private negotiations by the affected parties when property rights are clearly established
private goods
rivalrous and exclusive