Unit 2 - Technology, population and growth, key terms

Question 1

Equilibrium

Answer 1

A model outcome that is self-perpetuating. In this case, something of interest does not change unless an outside or external force is introduced that alters the model’s description of the situation.

Question 2

Subsistence level

Answer 2

The level of living standards (measured by consumption or income) such that the population will not grow or decline.

Question 3

Ceteris paribus

Answer 3

Economists often simplify analysis by setting aside things that are thought to be of less importance to the question of interest. The literal meaning of the expression is ‘other things equal’. In an economic model it means an analysis ‘holds other things constant’.

Question 4

Economic incentives

Answer 4

Economic reward or punishment, which influences the benefits and costs of alternative courses of action.

Question 5

Relative prices

Answer 5

The price of one good or service compared to another (usually expressed as a ratio)

Question 6

Economic rent

Answer 6

A payment or other benefit received above and beyond what the individual would have received in his or her next best alternative (or reservation option)

Question 7

Reservation option

Answer 7

A person’s next best alternative among all options in a particular transaction, also known as the fallback option