book vocab. ch 1, 2, 4

Question 1

efficiency

Answer 1

the property of society getting the most it can from its scarce resources

Question 2

equality

Answer 2

the property of distributing economic prosperity uniformly among the members of society

Question 3

rational people

Answer 3

people who systematically and purposefully do the best they can to achieve their objectives

Question 4

marginal change

Answer 4

a small incremental adjustment to a plan of action

Question 5

incentive

Answer 5

something that induces a person to act

Question 6

property rights

Answer 6

the ability of an individual to own and exercise control over scarce resources

Question 7

market failure

Answer 7

a situation in which a market left on its own fails to allocate resources efficiently

Question 8

externality

Answer 8

the impact of one person’s actions on the well being of a bystander

Question 9

market power

Answer 9

the ability of a single economic actor or small group of actors to have a substantial influence on market prices

Question 10

productivity

Answer 10

the quantity of goods and services produced from each unit of labor input

Question 11

inflation

Answer 11

an increase in the overall level of prices in the economy

Question 12

business cycle

Answer 12

fluctuations in economic activity, such as employment and production

Question 13

circular flow diagram

Answer 13

a visual model of the economy that shows how dollars flow through markets among households and firms

Question 14

market

Answer 14

a group of buyers and sellers of a particular good or service

Question 15

competitive market

Answer 15

a market in which there are many buyers and many sellers so that each has a negligible impact on the market price

Question 16

law of demand

Answer 16

the claim that other things being equal, the quantity demanded of a good falls when the price of the good rises

Question 17

demand schedule

Answer 17

a table that shows the relationship between the price of a good and the quantity demanded

Question 18

demand curve

Answer 18

a graph of the relationship between the price of a good and the quantity demanded

Question 19

law of supply

Answer 19

the claim, that other things being equal, the quantity supplied of a good rises when the price of the good rises

Question 20

supply schedule

Answer 20

a table that shows the relationship between the price of a good and the quantity supplied

Question 21

supply curve

Answer 21

a graph of the relationship between the price of a good and the quantity supplied

Question 22

equilibrium

Answer 22

a situation in which the market price has reached the level at which quantity supplied equals quantity demanded

Question 23

equilibrium price

Answer 23

the price that balances quantity supplied and quantity demanded

Question 24

equilibrium quantity

Answer 24

the quantity supplied and the quantity demanded at the equilibrium price

Question 25

surplus

Answer 25

a situation in which quantity supplied is greater than quantity demanded

Question 26

shortage

Answer 26

a situation in which quantity demanded is greater than quantity supplied

Question 27

law of supply and demand

Answer 27

the claim that the price of any good adjusts to bring the quantity demanded for that good into balance