Unit 1 Flashcards
(26 cards)
Factors of production
Land labor capitol and entrepreneurship
Capital
Machines, tools, and factories
Microeconomics
Choices made by individuals households and etc. that make up the whole economy
Macroeconomics
Focuses on the whole economy of a nation
Aggregate
Government is often a key player
Positive economics
describes the way economy works
Normative economics
Prescription on how the economy should work
Scarcity
A short supply or shortage
Opportunity cost
Things given up when a choice is made like money, time, etc.
Production possibilities
A simplified representation of reality that shows the importance of trade offs in analysis
Absolute advantage
Out produce given factors of production
Comparative advantage
Opportunity cost of producing the good is lower
Specialization
Concentrating on producing a specific good as it is the best economic option
Fair terms of trade
Negotiating the price of goods exchange based on the two opportunity costs
Law of Demand
The price of a good and the quantity demanded have an inverse relationship
Quantity demand
A total amount of a good or service that consumers demand over a period of time
Substitutes
A product or service that consumers see as essentially the same or similar enough to the product
Complements
Goods that are consumed together
Normal goods
Good that experiences an increase in its demand due to a rise in consumers income
Inferior goods
A good that demand drops when income rises
Law of supply
All other factors being equal, as a good price increases, the quantity will increase
Quantity supplied
The number of goods or services that suppliers will produce and sell at a given market price
Market Equilibrium
Achieved at the intersection of demand and supply
Surplus
An amount of something left over when requirements have been met
Shortage
The supply of a good does not meet the demand
