Final Flashcards
(59 cards)
Definition of economics
Economics study of how market agents (firms,individuals,countries) interact thus how society choses to allocate its scarce resources to the production of goods and services in order satisfy unlimited wants
Definition of Opportunity costs
Opportunity cost of some decision is the value of then next best alternative that you have to give up because of that decision. Opportunity cost is the cost of your next best option
three factors of production/scarce resources
land, labor, & capital
Ceteris Parabius
All else held constant, or, all else held equal
assumptions of PPC
Fixed Resources, Fully employed Resources, Technology is fixed
If assumptions hold of PPC
then, the curve represents the optimal production of the economy. Anything above is unattainable while any point below represents economy working at suboptimal conditions.
gain in resources/loss in resourcs
Curve shifts out/curve shifts in
Not fully employed
A point below the curve. not working at optimal conditions
Loss in tech/ gain in tech
curve shifts in/curve shifts out
Definition of market
A place where buys and sellers get together to determine the price and quantity of goods and services exchanged
Shortage
not enough product to meet demand
Surplus
Supply more product than demand
normal good
things like steak: if your income rises you will demand more of it
interior good
things like baloney: if your income rises, you will demand less of the good
Contemplementary good
“steak sauce”, if the price of one good rises, the demand for complement falls, so if the price of steak rises, the demand for steak sauce drops
Change in quantity demanded is
change along the curve
change in demand
shift of actual curve in or out
Non price factors of Demand
Number of buyers, income, tastes and preferences, price of related goods(Compliment-substitute), Expectations of future price changes
Law of Demand
The inverse relationship between the price of a good and the quantity of goods demanded. This is at a point in time.
why is Demand cruved down
Common sense(the more people that want something the more the price is driven down/Diminishing Marginal Utility/
Law of supply
positive relationship between quantity supplied and price
Non price factors of Supply
Number of sellers/taxes and subsides/ expectations/resource prices/ technology
Substitute good Definition
a good that competes with another good for consumer dollars.
Price floor
Legal minimum seller can be paid for product(minimum wage)