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Flashcards in econ vocab test 1 Deck (39):
1

microeconomics

small econ
individuals (consumer and firm)
market interactions
Govt. taxes, subsidies, and regulations

2

macroeconomics

aggregate variables (GDP, inflation, unemployment)
cause and effect relationships
Govt. monetary and fiscal policy

3

Positive economics

looks at what is, and how things work, facts

4

Normative economics

looks at what should be, what is "best"

5

Maximize utility

consumers seek utility which means happines

6

Maximize profit

producers seek profit which, when spent, can be converted to utility

7

Opportunity Cost

the value of the next best alternative action

8

Trade offs

if you do one thing, it means you can't do something else

9

Diminishing marginal utility

the more we consume of a good the less utility each new unit brings

10

Productivity

the amount of output that can be produced by an economic agent in a specific time period

11

Production Possibilities Curve/Frontier

A graphical representation of the different combinations of total output that can be produced by an economic agent by utilizing all available resources

12

Efficient points

ones located on the line of the PPC

13

inefficient points

are ones inside the line of the PPC, feasible but not the best option

14

infeasible/impossible points

outside the line, don't work

15

Slope of the PPC

the opportunity cost for whatever is on the X axis is equal to the slope!!!, always negative

16

Absolute advantage

term used to describe the economic agent that can produce the highest quantity of a particular good. (whoever can produce the most)

17

Comparative advantage

term used to describe the economic agent that can produce a particular good for the smallest opportunity cost.
Cant have comparitive advantage in both goods

18

indifference curves

lines that show all combinations of the 2 goods that result in the same level of utility.
bowed to the origin
curviness is result of diminishing marginal utility

19

terms of trade

the price of one good in terms of another that is mutually agreed upon

20

pareto optimal

both parties are benefitting equally

21

budget constraint

a representation of how much money we have and how many goods we can afford to purchase

22

budget set

points that we can also afford but we wouldn't be using all of our money

23

equilibrium

occurs when the marginal benefit per dollar spent is equal across all goods

24

Demand

the relationship between your willingness to pay or buy a good and the quantity you would purchase

25

quantity demanded

each point on the demand curve is the quantity demanded at that price

26

Inferior goods

these are goods whose demand shifts LEFT with an increase in income

27

Law of demand

If the price of a good goes up, the quantity demanded goes down

28

consumer surplus

top triangle

29

Price elasticity of demand

measures how much your quantity demanded would decrease with an increase in price

30

income elasticity

measures your sensitivity of consumption to changes in income

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income elasticity < 0

inferior good

32

income elasticity > 0

normal good

33

price elasticity > 1

elastic

34

price elastic < 1

inelastic

35

income elasticity > 1

luxury good

36

luxury good

good that sees a more proportional increase in demand for increase in income

37

Cross price elasticity

measures the sensitivity of your demand for good A to changes in price of a related good B

38

Cross price elastcity < 0

the goods are complements

39

cross price elasticity > 0

goods are substitutes