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22 terms

Macroeconomics Test 1

STUDY
PLAY
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.