Scarcity
the condition that arises because wants exceed the ability of rescources to use them
Economics
The social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity, the incentives that influence those choices, and the arrangements that coordinate them.
Microeconomics
the study of the choices that individuals and businesses make and the way these choices intereact and are influnced by governments
Macroeconomics
the study of the aggregate(total) effects on the national economy and the global economy of the choices that individuals, businesses, and governmetns make
Goods and Services
The objects (goods) and the actions(services) that people value and produce to satisfy human wants
What
determines the quantities of what is produced
How
determines how something is produced
For Whom
determines who the services are produced for
Self Interest
THe chocies that are best for the individual that makes them
Social Interest
THe choices that are best for society as a whole
Globalization
the expansion of international trade and production of components and services by firms in other countries
Tradeoff
an exchange-giving up one thing to get something else
Rational choice
a choice that uses the available resources to best achieve the objective of the person making the choice
Benefit
gain or pleasure that something brings
Opportunity Cost
the best thing you must give up in order to get something
Margin
A choice that is made by comparing all the relevent alternatives systematically and incrementally
Marginal Benefit
The benefit that arises from a one-unit increase in an activity; measured by what you are willing to give up to get one additional unit of something
Marginal Cost
The opportunity cost that arises from a one a one-unit increase in an activity; what you must give up to get one additional unit of it
Incentive
a reward or a penalty that encourages or discourages an action
Economic Model
a description of some feature of the economic world that includes only those featrues assumed necessary to explain the observed facts
Correlation
the tendency for the values of two variables to move together in a predictable and related way
Normative statement
states what ought to be
Positive statement
states what is
Personal Economic Policy
involves a marginal benefit and a marginal cost based on personal decisions
Business Economic Policy
involves the evaluation of a marginal benefit and a marginal cost for a company
Governement Economic Policy
calls for decisions taht involve the evaluation of a marginal benefit and a marginal cost and an investigation of the interactiosn of individuals and businesses
Consumption Goods and Services
goods and services that are bought by individuals and used to provide personal enjoyment and contribute to a person's quality of life.
Capital Goods
goods that are bought by businesses to increase their productive resources
Government Goods and Services
goods and services that are bought by governments
Export Goods and Services
goods and services taht are proudced in one country and sold in another
Factors of Production
The productive resources that are used to produce goods and services-land, labor, capital, and entrepreneurship
Land
the "gifts of nature" or natural resources that we use to produce goods and services
Labor
The work time and work effort that people devote to producing goods and services
Human Capital
the knowledge and skill that people obtain from education, on the job training, and work experience
Capital
Tools, instruments, machines, buildings, and other items that have been produced in the past and that businesses now use to produce goods and services
financial capital is not capital
Entrepreneurship
the human resource that organizes labor, land, and capital to produce goods and services
Rent
income paid for the use of land
Wages
income paid for the services of labor
Profit (or loss)
income earned by an entrepreneur for running a business
Circular Flow Model
a model of the economy that shows the circular flow of expenditures and incomes that result from decision makers' choices and the way those choices interact to determine what, how, and for whom gods and services are produced
Households
Individuals or groups of people living together
Firms
The institutions that organize the production of goods and services
Market
Any arrangement that brings buyers and sellers together and enables them to get information and do business with each other
Goods Market
Market in which goods and services are bought and sold
Factor market
Markets in which the services of factors of production are bought and sold
Real Flow
the flows of the factors of production that go from households through factor markets to firms; goods and services that go from firms through goods and markets to households
opposites
Money Flow
the flow of payments made in exchange for the services of factors of production and of expenditures on goods ands services; Goes from households to goods market to firms
Production Possibilities Frontier(PPF) or Production Possibilities Curve( PPC)
the boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced, given the available factors of production adn the state of technology
Production Efficiency
a situation in which the economy is getting all that it can from its resources and cannot produce more of one good or service without producing less of something else
Free Lunch
A gift- getting something without giving up omething else
Economic Growth
The sustained expansion of production possibilities
Absolute Advatage
When one person/nation is more productive than another- needs fewer inputs or takes less time to produce a good or perform a production task
Comparative Advantage
the ability of a person to perform an activity or produce a good or service ata lower opportunity cost than anyone else
Quantity Demanded
The amount of any good, service, or resource taht people are willing and able to buy during a specified period at a specified price
Law of Demand
other things remaining the same, if the price of a good rises, the quntity demanded of that good decreases; and if the price of a good falls, the quantity demanded of that good increases
Demand
The relationship beween the quantity demanded and the price of a good when all other influences on buying plans remain the same
Demand Schedule
A list of the quantities demanded at each different price when all the other influences on buying plans remain the same
Demand Curve
A graph of the relationship between the quantity demanded of a good and its price when all the other influences on buying plans remain the same
Market Demand
The sum of the demands of all the buyers in the market
Change in Demand
a change in the quantity that people plan to buy when any influences on buying plans other than the price of the good changes
Substitute
A good that can be consumed in place of another good
Complement
A good that is consumed with another good
Normal Good
a good for which demand increases when income increases; and demand decreases when income decreases
Inferior Good
a good for which demand decreases when income increase; and demand increases when income decreases
Change in Quantity Demanded
a change in the quantity of a good taht people plan to buy that results from a change in the price of a good with all other influences on buying plans remaining the same
Quantity Supplied
the amount of any good, service, or resource that people are willing and able to sell during a specified period at a specified price
Law of Supply
other things remaining the same, if the price of a good rises, the quantity supplied of that good increases(have more to sell); and if the price of a good falls, the quantity supplied of that good decreases(less to sell).
Supply
the relationship between the quantity supplied and the price of a good when all other influences on selling plans reamain the same
Supply Schedule
A lisst of the quantities supplied as each different price when all the other influences on selling plans remain the same
Supply Curve
a graph of the relationship between the quantity supplied of a good and its price when all other influences on selling plans remain the same
Market Supply
The sum of all the supplies of all the sellers in the market
Change in Supply
A change in the quantity that suppliers plan to sell when any influence on selling plans other than the price of the good changes
Substitute in Production
a good that can be produced in place of another good
Complement in Production
a good that is produced along with another good
Change in the Quantity Supplied
A change in the quantity of a good that suppliers plan to sell that results from a change in the price of the good
Market Equilibrium
when the quantity demanded equals the quantity supplied-buyers' and sellers' plans are in balance
Equilibrium Price
The price at which the quantity demanded equals the quantity supplied
Equilibrium Quantity
The quantity bought and sold at the equilibrium price