general econ terms Flashcards
(32 cards)
opportunity
cost
–the cost of an economic decision in terms of the next best alternative (examples)
[OR –the value of the next best alternative sacrificed ]
market
economy / laissez-faire economy
–consumer sovereignty; private ownership of the means of production; self-interest;
–profit motive; resources allocated via supply and demand;
–signaling/rationing done through the price mechanism; competition between firms;
–free international trade (could also note difference between mkt. and mixed economy)
market
–place where products/goods are bought & sold
–process where buyers/demanders and sellers/suppliers interact (re-term could refer to demand only); determine P.
–institutional sense: all buyers/seller involved in a single good/commodity
positive
(economic)
statement
–an economic statement that is testable against data (in theory)
–an ‘is’ statement that makes a ‘scientific’ proposition (i.e. it is falsifiable & verifiable; non-normative)
normative
(economic)
statement
–a judgement based on values or opinion (i.e. an ‘ought’ vs an ‘is’)
–generally includes the terms like “should” or “ought to be” ; may also suggest ‘fair’ or ‘unfair’
private sector
–households and firms
–parts of an economy where government and foreign markets are generally not involved directly
–contrast with public sector : the state and/or government
privatization
–public sector assets (firms) being transferred to the private sector
– ownership of a resource and its development is handled by profit-seeking firms
(i.e. gov’t sells/selling off state owned assets/enterprises)
excess demand
(excess supply)
– exists when at some price the quantity demanded is greater than the quantity supplied
–pressure is exerted on the market price to increase
excess supply: ‘opposite’ – at price Q supplied is greater than Q demanded …pressure for a market price decrease
supply
–the quantity a firm/market is willing and able to offer (produce)
–at a given price, and over a specific period of time (c.parabis.)
– relationship between Qs and P
demand
–relationship between various prices (P) and the quantities consumers (households & individuals etc.) are willing and able to buy
–takes place in a given time period and c. paribas
– “market demand” is the summation of individual consumer demand (i.e. diagrammatically: it is the summation of individual D-curves)
deregulation
–policies by governments or other central authorities (i.e. pricing authority)
–designed to lower or eliminate government rules/regs. on the way an industry operates
–typically have a positive effect on the ‘supply-side’ of the economy
circular flow model
circular flow model
–an economic model showing major interrelationships in an economy
–flows, both real and monetary, between all major decision-making units (i.e. consumer, governments etc.) in an economy
centrally planned economy
–an economy where the state determines the prices of goods and services as well as the levels of output for g & s.
natural capital
–refers to the factor input ‘land’ BUT implies the land is not ‘fixed/static’ as only a natural endowment
–land that can be improved & increased OR destroyed & decreased by human action
–increase/decrease may also occur due to government policy
nationalization
–the transfer of privately owned firms (or assets) to the state
–state may or may not pay a ‘fair market price’ for the assets/firms
–sale may or may not be forced
non-price rationing
–rationing systems that are not based on free market prices
–could be based on ‘sellers preferences’ or
–“first come, first served” ; lottery or some other system for allocating scarce resources
ceteris paribus
–Latin phrase… “all other factors remain constant”
–essential condition for basic model-building in economics; allowing many causation complications to be suspended
consumer sovereignty
the idea that consumers ultimately dictate what will be produced (or not produced) by choosing what to purchase (and what not to purchase).
capital
the things that are themselves produced and then used to produce other goods and services
production
the process that transforms scarce resources into useful goods and services
CONSUMPTION
spending by consumers/households on durable and non-durable goods & services over a period of time. Consumption is driven by the wants and needs of households seeking to maximize utility. Some goods and services are used in a long-term (i.e. a dishwasher, car, etc.) and some are used over short-term (i.e. food—especially a ‘baked good’) *🡪 i.e. a ‘DEMAND CURVE’ measures ‘satisfaction’
utility
the total satisfaction*, pleasure, enjoyment (etc.) received from consuming a good or service.
efficiency
optimal use of scarce resources to maxmize production of goods that are demanded and minimize waste
–generally: non-wasteful use of scarce resources (the relationship between actual output of goods/services compared to the input of resources: PPC model) 🡪measured in physical terms
–in ‘productive efficiency’ (for example) 🡪 production occurs with a minimum average ‘per-unit’ cost (i.e. this implies that there is a minimal waste of resources)
incentive
a cost or benefit that motivates a decision or action by consumers/households or businesses/firms or other participants in an economy.
