Economics Flashcards
This economist wrote An Inquiry into
the Nature and Causes of the Wealth of
Nations.
Adam Smith
This economist pioneered the idea that
self-interest individuals make up the
economy.
Adam Smith
This field of study analyzes the choices
that consumers make.
economics
Economists estimate that the average
supermarket carries around this
number of items.
33,000
One of the key principles of economics
is that individuals primarily act in this
manner.
self-interested
This field of study allows us to
understand how the economy functions
smoothly or why it breaks down.
economics
Economics is primarily about the way in
which individuals make choices about
allocating these services or assets.
(scarce) resources
In economics, individuals make choices
to satisfy this unlimited quantity.
human wants
Economists make these five basic
assumptions.
scarcity, trade-offs,
opportunity cost, rationality,
and gains from trade
This economic assumption refers to the
limited amount of time, work, energy,
knowledge, and capital in society.
scarcity
Economic choices about how much to
spend on healthcare, national defense,
and education fall under this economic
assumption.
scarcity
This economic assumption refers to the
fact that every choice we makes
requires us to give up something in
return for something else.
trade-offs
Because of this economic assumption,
every choice requires a trade-off.
scarcity
The time spent watching television
instead of studying exemplifies this
economic assumption.
trade-offs
This term refers to what we give up in
order to get our preferred choice.
opportunity cost
This economic assumption refers to the
best alternative we have when making
a decision.
opportunity cost
This activity is the opportunity cost of
watching television when you have an
upcoming test.
studying
This value is the most important
opportunity cost of attending college.
time
When people compare the benefits of
each action and choose the one that
produces the greatest benefit, they are
engaging in this activity.
cost-benefit analysis
This economic assumption refers to
selecting the action that produces the
greatest benefit.
rationality
These two adverbs describe the way in
which most people perform cost-benefit
analysis.
intuitively and approximately
This term refers to individuals
maximizing in areas where they are
better than others.
specialization
This economic assumption refers to
trade based on specialization.
gains from trade
This economic activity must be
voluntary for the benefits to outweigh
the costs for both parties.
trade
Economic analysis mainly relies on
these three skills.
observation, description, and
measurement
These economic tools allow
economists to compare interactions
between economic values.
models
Economic models have this degree of
simplicity.
high
Economists mainly use these two types
of representations in their models.
diagrams and formulas
This type of economics explains
economic phenomena and allows
economists to make predictions based
on situations.
positive
This type of economics focuses on
cause-and-effect relationships.
positive
Positive economics is meant to be free
of this human factor.
judgment
This type of economics can predict the
way in which a price decrease will
affect the consumption of gasoline.
positive
This type of economics focuses on
what should be the case as opposed to
what is the case.
normative
Normative economics relies on this
human quality.
judgement
Normative economics uses this form of
analysis to consider different possible
outcomes.
cost-benefit analysis
This type of economics would
recognize the ways that increasing the
minimum wage would affect different
economic groups.
positive
This type of economics would use a
value judgment to determine whether to
raise the minimum wage.
normative
This outcome arises if there is no way
to improve the well-being of one person
without reducing the well-being of
another.
Pareto efficiency
This economist argued that an outcome
is efficient if there is no way to improve
the well-being of one person without
reducing the well-being of another.
Vilfredo Pareto
Vilfredo Pareto was born in this
country.
Italy
If goods and services are not fully
distributed, then the outcome does not
meet this type of efficiency.
Pareto
Deciding which distribution is best to
meet Pareto efficiency is an example of
this type of economics.
normative
Economists consider this economic
principle to be the first step to maximize
overall well-being.
efficiency
This branch of economics focuses on
individual behavior.
microeconomics
Microeconomics concentrates on
individual behavior as well as the
behavior of these economic institutions.
markets
This branch of economics focuses on
the performance of the economy at a
national level.
macroeconomics
Macroeconomics concentrates on this
scale of the economy.
national
Both microeconomics and
macroeconomics share basic
assumptions about this consumer
aspect.
human behavior
The two main branches of economics
differ in these two aspects.
scales and modes of
analysis
Many economists separate these two
branches of economics because of
their different modes of analysis.
microeconomics and
macroeconomics
Economic coordination stems from the
interaction between these two
economic principles.
supply and demand
The action of buyers and sellers in a
market influence these two economic
values of a good.
price and quantity
This branch of economics deals with
the interaction of supply and demand.
microeconomics
Economists see this type of market
competition as the ideal model for
economic analysis.
perfect
The effects of taxation and other
government policies fall under this
branch of economics.
microeconomics
This term refers to all the buyers and
sellers of a particular good or service.
market
This Chicago market is highly
organized.
Chicago Mercantile
Exchange
This economic intermediary helps to
set a price at an exchange.
auctioneer
Local gas stations fulfill this economic
role in the market for gasoline.
suppliers
The vehicle owners in a community
fulfill this economic role in the market
for gasoline.
buyers
The market for gasoline has this
degree of competition.
high
No one buyer or seller can influence
this economic value in a perfectly
competitive market.
price
The actions of these two economic
groups determine market price and
quantity.
buyers and sellers
This type of market occurs when a
good or service is highly standardized
with many market participants, and all
participants are well informed about the
market price.
perfectly competitive
The goods and services in a perfectly
competitive market must have this
degree of standardization.
high
Economists often assume this level of
market competition to analyze trends.
perfect
This term refers to the amount of a
good that consumers are willing to
purchase.
quantity demanded
This economic value is the most
important determinant of the quantity
demanded of a good.
price
This economic law states that
consumers will demand less of a good
if the price of the good is higher.
law of demand
Because of the law of demand, this
relationship exists between a good’s
price and quantity demanded.
law of demand
The law of demand centers on these
two factors.
price and quantity demanded
The law of demand is a result of this
economic analysis used by rational
decision-makers.
cost-benefit analysis
The opportunity cost of consuming a
good increases as this economic factor
increases.
price
The law of demand relates this
economic factor to the quantity
demanded of a good.
price
The law of demand relates this
economic factor to the price of a good.
quantity demanded
This type of economic diagram records
consumer demand for a good.
demand schedule
The demand curve of a diagram slopes
in this direction.
downward
This term refers to the diagram of a
demand schedule.
demand curve
This economic factor of demand is
often plotted on the horizontal axis of a
diagram.
quantity demanded
This economic factor of demand is
often plotted on the vertical axis of a
diagram.
price
Economists can move in these two
directions along the demand curve to
change the quantity demanded of a
good.
up and down
Adding multiple demand curves in this
direction gives the market demand.
horizontally
This market curve depicts the
relationship between quantity
demanded and price.
demand
Creating new bicycle lanes in a city will
shift the demand curve for gasoline in
this direction.
leftward
As you move to the left along a
demand curve, this economic factor will
decrease.
quantity demanded
As you move to the right along a
demand curve, this economic factor will
decrease.
price
The demand curve of a good will shift
for these four main reasons.
income, tastes, expectations,
and number of buyers
This term refers to the money an
individual receives from employment.
income
For most goods, demand and income
have this type of relationship
positive
For normal goods, this economic factor
rises as income rises.
demand
This term refers to goods for which
income and quantity demanded have a
positive relationship.
normal goods
This term refers to goods for which
income and quantity demanded have a
negative relationship.
inferior goods
For inferior goods, this economic factor
decreases as income rises.
quantity demanded
Bus rides are an example of this type of
good.
inferior
Gasoline is an example of this type of
good.
normal
According to the law of demand, as the
price of airline tickets decreases, this
economic factor will increase.
quantity demanded
A good that can suitably replace
another is this type of good.
substitute
This term refers to goods for which the
decrease in the price of one good leads
to a decrease in the quantity demanded
of another.
substitutes
Airline travel and travel by car are
these types of goods.
substitute
This term refers to goods for which a
decrease in the price of one good leads
to an increase in quantity demanded of
another.
complements
Automobile insurance and car
ownership are these types of goods.
complements
Consumers hold these opinions and
interests.
tastes
Concerns about the environmental
impact of driving exemplify this aspect
of consumer behavior.
tastes
Consumers hold these beliefs about
how the market will change in the
future.
expectations
Cutting back on spending because you
fear losing employment exemplifies this
aspect of consumer behavior.
expectations
Economists calculate market demand
by adding the demands of this group.
individual consumers
This term refers to the amount of a
good that sellers are willing to produce.
quantity supplied
This relationship exists between price
and quantity supplied.
positive
This law relates price and quantity
supplied.
law of supply
According to the law of supply, as price
increases, this economic factor will
increase.
quantity supplied
The law of supply relates quantity
supplied to this economic factor.
price
The law of supply relates price to this
economic factor.
quantity supplied
This type of economic analysis
determines the law of supply.
cost-benefit analysis
According to the law of supply, as the
price of gasoline rises, this economic
factor will rise.
quantity supplied
According to the law of supply, at lower
prices of gasoline, suppliers will be less
willing to produce this economic factor.
quantity
This economic curve reflects the
relationship between price and quantity
supplied.
supply curve
The supply curve reflects this
relationship between price and quantity
supplied.
positive
This economic factor is on the
horizontal axis of the supply curve.
quantity supplied
This economic factor is on the vertical
axis of the supply curve.
price
To determine the market supply curve,
economists add individual supply
curves in this direction.
horizontally
The supply curve shifts for these four
main reasons.
input prices, technology,
expectations, and number of
sellers
This term refers to the goods and
services that sellers must purchase to
supply a product.
inputs
An increase in input costs decreases
this economic factor at every price for
suppliers.
quantity supplied
If input prices fall, the supply curve of a
good will shift in this direction.
right
If input prices rise, the supply curve of
a good will shift in this direction.
left
Changes in this branch of knowledge
can affect how efficiently businesses
operate and how advanced their
products are.
technology
Improvements in technology have this
effect on the quantity of goods
supplied.
increase
Suppliers will reduce this quantity if
they expect prices to increase in the
future.
quantity supplied
As the number of sellers that enter the
market increases, this quantity
increases.
quantity supplied
The intersection between the demand
curve and the supply curve of a market
occurs at this point.
equilibrium
This term refers to the most efficient
combination of both price and quantity
of a good.
equilibrium
A market’s equilibrium point is the
intersection between the supply curve
and this market curve.
demand
This term refers to the point at which
forces at work in a system are
balanced.
equilibrium
At this point in the market, no
participant has a reason to alter their
behavior.
equilibrium
The market demand curve and supply
curve have this number of
intersections.
one
Buyers and sellers of a good are
satisfied at this point on a market
diagram.
equilibrium
Market equilibrium consists of these
two economic factors.
price and quantity
This situation arises when suppliers
would like to sell a greater amount of a
good than consumers are willing to
purchase.
excess supply
In cases of excess supply, this market
participant wants a greater amount of
supply than the other.
suppliers
In cases of excess supply, this market
participant has an incentive to lower
their asking price.
suppliers
If suppliers would like to sell a lesser
amount of a good than consumers are
willing to purchase, this type of demand
arises.
excess demand
In cases of excess demand, this market
participant wants a greater amount of
demand than the other.
buyers
In cases of excess demand, this market
participant has an incentive to raise
their asking price.
buyers
This type of market tends to gravitate
toward the equilibrium price and
quantity.
competitive
This type of market allocates resources
efficiently.
competitive
This type of market ensures that goods
and services go to the buyers who
value them most highly.
competitive
A competitive market ensures that
supplies provide goods with the lowest
of this type of cost.
input
The competitive market equilibrium
maximizes the benefits between these
two parties.
buyers and sellers
The height of a market demand curve
represents this type of buyer’s
willingness to pay.
marginal
This adjective describes the marginal
buyer’s attitude towards buying a good
or service.
indifferent
This term refers to the surplus value
that consumers receive from a certain
market price and quantity.
consumer surplus
Adding up the total surplus of all buyers
gives this type of surplus.
consumer surplus
Subtracting the height of the market
price from the height of this market
curve gives consumer surplus.
demand
Total consumer surplus equals the area
below the demand curve and above
this economic factor.
market price
The height of a market supply curve
represents this type of seller’s
willingness to supply.
marginal
This term refers to the combined
surplus of all suppliers.
producer surplus
Producer surplus is the area above this
market curve and below the market
price.
supply
This type of surplus is the sum of
consumer surplus and producer
surplus.
total surplus
A social planner’s primary economic
goal is to maximize this economic
value.
total surplus
Maximizing total surplus ensures that
this economic efficiency is met.
Pareto
This term refers to the total benefits
that market participants receive from
their interactions.
total surplus
Market points left or right of the
equilibrium lack this economic
standard.
efficiency
Synthetic Bovine Growth Hormone is
an example of this type of advance.
technological
Dairy farmers used this synthetic
development to increase milk
production by 10 to 15 percent.
Bovine Growth Hormone
These market participants benefited the
most from the development of synthetic
Bovine Growth Hormone.
consumers
Public health campaigns against
cigarette smoking reduce this market
factor.
demand
Public efforts to reduce smoking shift
the demand curve in this direction.
left
This term expresses the way in which
changes in price affect the demand for
a good.
price elasticity
This term refers to changes in the
quantity demanded of a good in
response to changes in price.
price elasticity of demand
Dividing the percent change in this
economic factor by the percent change
in price gives the price elasticity of
demand.
quantity demanded
Price elasticity of demand will never be
this type of number.
negative
The greater this economic value, the
greater the change in the quantity
demanded.
elasticity
If a one percent change in price leads
to a greater than one percent change in
the quantity demanded, the demand
can be described with this term.
elastic
If a one percent change in price leads
to a less than one percent change in
the quantity demanded, the demand
can be described with this term.
inelastic
If a one percent change in price leads
to a one percent change in the quantity
demanded, the demand can be
described with this term.
unit elastic
These four main factors influence the
price elasticity of demand.
substitutes, necessities,
market definition, and time
horizon
Goods with close substitutes have this
degree of price elasticity of demand.
high
Cola drinks typically have this degree
of price elasticity of demand.
high
Necessities tend to have this degree of
price elasticity of demand.
low
Gasoline tends to have this degree of
price elasticity of demand.
low
The broader this factor, the fewer close
substitutes a good will have.
market definition
Over time, goods shift closer to this
degree of elasticity.
elastic
Given two demand curves that pass
through the same point, the flatter
curve will have this degree of elasticity
compared to the other.
higher
The slope of a linear demand curve
must have this mathematical property.
constant
As you move down and to the right
along a demand curve, this economic
value decreases.
elasticity
This type of elasticity appears as a
vertical line on a market diagram.
perfectly inelastic
This type of elasticity appears as a
horizontal line on a market diagram.
perfectly elastic
This term refers to the ease with which
suppliers can change their quantity
supplied.
price elasticity of supply
This term refers to the percent change
in quantity supplied divided by the
percent change in price.
price elasticity of supply
The price elasticity of supply relates
these two economic factors.
quantity supplied and price
These three main factors affect the
price elasticity of supply.
ease of entry and exit,
scarce resources, and time
horizon
This type of elasticity occurs when new
suppliers can enter or exit a market
easily.
elastic
This type of elasticity occurs when new
suppliers cannot enter or exit a market
easily.
inelastic
The supply of airline flights tends to
have this degree of elasticity.
high
If the inputs of a good are scarce, then
the good will have this type of elasticity.
inelastic
The supply of beachfront properties
has this degree of elasticity.
low
The elasticity of supply changes in this
manner as the time horizon increases.
increases
Given two supply curves that pass
through the same point, the flatter
curve will have this degree of elasticity
compared to the other.
higher
Van Gogh paintings have this type of
elasticity of supply.
perfectly inelastic
Multiplying these two factors at the
equilibrium point gives total revenue.
price and quantity
Total revenue is calculated at this
specific market point.
equilibrium
This type of elasticity will cause total
revenue to increase down a demand
curve.
elastic
This type of elasticity will cause total
revenue to decrease down a demand
curve.
inelastic
The demand for milk tends to have this
type of elasticity.
inelastic
Governments use these controls to set
minimum and maximum prices.
price controls
The United States government typically
established this type of pricing on major
food crops.
minimum
The United States minimum wage is an
example of this type of government
economic policy.
price controls
The federal government imposed a
price ceiling on this Middle Eastern
good in 1979.
oil
Government intervention in the form of
price controls creates this type of cost.
social
This type of government economic
policy establishes a maximum on the
price of a good.
price ceiling
Rent control reduces this type of
surplus.
total
In a competitive market, this economic
factor rations goods.
price
Over time, supply and demand of
apartments shifts to this type of
elasticity.
elastic
This type of market demand will occur
when landlords lower rent.
excess demand
Minimum pricing on crops reduces
these two types of surpluses.
consumer and producer
Governments use this form of
economic payment to raise revenue for
public spending.
taxes
This political entity has the right to
enforce taxes.
government
A tax on consumers shifts the market
demand curve in this direction.
downward
These two market participants share
the burden of a tax.
suppliers and buyers
Taxes on consumers usually lower this
type of surplus, preventing mutually
beneficial exchange.
total
A tax on suppliers shifts the market
supply curve in this direction.
upward
This economic gap arises between the
amount consumers pay and the
amount producers receive.
price wedge
Price wedges reduce this economic
factor, regardless of who pays the tax.
quantity
models A tax will cause this type of reduction in
social welfare.
deadweight loss
Deadweight loss takes this shape on
market diagrams.
triangle
The burden of a tax depends on these
two elasticities.
supply and demand
The less elastic this market curve, the
greater the burden of the tax the buyers
must pay.
demand
The less elastic the supply and demand
curves, the lower this tax value will be.
deadweight loss
This term refers to the benefits that
trade participants receive.
gains from trade
Economic specialization in certain
fields leads to this economic activity.
trade
This model helps economists measure
the trade-off that producers face when
deciding on how much of a certain
good to produce.
production possibility frontier
All points along this economic line are
efficient for production.
production possibility frontier
This situation occurs when one
producer’s PPF is above and to the
right of another’s at every point.
absolute advantage
This situation arises when one
producer can carry out an activity more
efficiently and at a lesser cost than
another.
comparative advantage
Trading partners need to differ in this
economic advantage in order to
improve their overall well-being through
trade.
comparative
This type of trade can expand the size
of the economy and increase the size
of different industries.
free
If a country’s cost of supply is less than
world price, then the country will
become this type of trade participant.
exporter
The difference between these two
economic factors is exported via world
trade.
domestic consumption and
quantity supplied
For countries that export goods, this
economic surplus decreases as price
rises.
consumer
For countries that export goods, this
economic surplus increases as price
rises.
producer
These market participants benefit most
when a country becomes an exporter of
a good.
producers
These market participants benefit least
when a country becomes an exporter of
a good.
consumers
This type of welfare increases when a
country becomes an exporter.
social
For countries that import goods, this
economic surplus increases as price
rises.
consumer
For countries that import goods, this
economic surplus decreases as price
rises.
producer
These market participants benefit most
when a country becomes an importer of
a good.
consumers
These market participants benefit least
when a country becomes an importer of
a good.
producers
This economic factor rises when trade
is allowed and domestic price falls to
the world price.
quantity consumed
Domestic producers lower this quantity
as a response to lower world prices.
quantity supplied
The difference between these two
economic factors is imported in world
trade.
quantity produced
domestically and quantity
consumed domestically
who supply goods and services in the
economy.
firm
According to this economic law, firms
will supply a greater quantity of a good
as the price rises.
law of supply
This goal is the main priority of a firm.
maximizing profits
A company’s profit is the difference
between these two economic values.
total revenue and total costs
To calculate total revenue, multiply the
total quantity of output by this economic
value.
price
This type of cost includes the
opportunity cost of the resources used
in production.
economic
This type of cost includes only actual
monetary expenditures.
accounting
This type of cost cannot be changed in
the short run.
fixed
This type of cost can be changed in the
short run.
variable
This type of cost is the increase in
costs from producing an additional unit
of output.
marginal
Dividing the increase in total costs by
this economic value gives marginal
cost.
increase in quantity
This phenomenon occurs when the
addition of more workers leads to less
and less additional output.
diminishing returns to scale
This term refers to the additional
revenue gained from producing an
additional unit of output.
marginal revenue
If diminishing returns to scale apply,
this type of economic cost will increase
as output increases.
marginal
A profit-maximizing firm’s supply curve
will have this type of slope.
upward
More producers added to a market will
shift the market supply curve in this
direction.
outward
Producers will continue to enter the
market as long as they are making this
type of economic profit.
positive
Producers will stop entering the market
when economic profits reach this value.
zero
In a competitive market, business
owners earn this amount of economic
profit.
zero
This economic concept is a way of
allocating productive resources
between different activities.
price
Markets for commercial airplanes,
automobiles, and cereals share this
type of market competition.
imperfect
This term refers to markets with one or
few suppliers.
imperfectly competitive
Firms in imperfectly competitive
markets want to maximize this
economic concept.
profit
Firms in imperfectly competitive
markets face demand curves with this
type of slope.
downward
Firms with downward-sloping demand
curves possess this economic trait.
market power
This term refers to the ability of firms to
choose market prices.
market power
This type of market features only one
supplier.
monopoly
This term refers to the obstacles
preventing new competitors from
entering a market.
barriers to entry
This economic phenomenon is the
primary reason for the creation of a
monopoly.
barriers to entry
The market for diamonds is an example
of this type of market.
monopoly
The DeBeers company owned this
percentage of the world’s diamonds.
80
This type of monopoly occurs when the
government provides rights to a single
supplier to supply a product.
government-created
Patents and copyright laws are
examples of this type of monopoly.
government-created
Under patent law, the inventor of a new
technology earns the exclusive right to
use the technology for this number of
years.
20
This type of monopoly occurs when a
single supplier can supply the market at
a lower cost compared to multiple other
firms.
natural
Railroads, pipelines, and cable
television are examples of this type of
monopoly.
natural
Natural monopolies primarily occur
when a firm has a high number of these
costs.
fixed
The profit-maximizing strategy for every
firm is to increase supply until marginal
cost is equal to this economic value.
marginal revenue
Increasing supply beyond the
intersection of marginal revenue and
marginal cost causes this economic
value to decline.
profit
Market equilibrium generally occurs at
a lower price and higher quantity for
this type of market.
monopoly
A transfer of this type of surplus occurs
in a monopoly.
consumer
This 1890 law required the government
to review large mergers and
acquisitions.
Sherman Anti-Trust Act
Anti-trust laws helped split up this
technology company in 1984.
AT&T
This technology company was forced to
separate its Internet browser from its
operating system.
Microsoft
Public utilities such as electric power
companies must have their rates
approved by this external party.
public oversight agencies
This type of government often controls
local water, sewer, and sanitation
services.
municipal
This form of ownership is commonly
used to solve the problem of a
monopoly.
public
This term refers to a situation in which
companies charge a customer based
on the value the customer places on its
service.
price discrimination
With price discrimination, a firm’s
marginal revenue curve will be identical
to this curve.
market demand
When companies offer different
packages of television channels, they
are employing this economic strategy.
price discrimination
