Unit 1
Unlimited wants and limited resources
What is scarcity?
This law states that, all else being equal, as the price of a good increases, the quantity demanded decreases.
What is the law of demand?
The sum of fixed and variable costs is known as this.
What are total costs?
A graph showing maximum combinations of two goods or services that can be produced with limited resources.
What is PPC?
The cost of producing one more unit of a good is called this.
What is marginal cost?
The value of the next best alternative foregone when making a decision.
What is opportunity cost?
A government-imposed maximum price that is set below the equilibrium price, leading to shortages.
What is a binding price ceiling?
A market structure where many firms sell identical products, and no single firm can influence the market price.
What is perfect competition?
The supply line is horizontally straight in this graph.
Perfeclty elastic graph
The examination of additional benefits and costs of an activity.
What is marginal analysis?
The ability to produce a good at a lower opportunity cost than others
What is comparative advantage?
Prices adjust in a market to bring supply and demand into balance.
What is the law of supply and demand?
This occurs when long-run average costs decrease as production increases.
What are economies of scale?
The supply line in this graph is vertically straight.
Perfeclty inelastic graph
When a producer can provide a good or service in greater quantity for the same cost, or the same quantity at a lower cost, than its competitors.
What is absolute advantage?
The point where an economy operates at maximum efficiency, producing goods and services without waste, is located on this curve.
What is the production possibilities curve (PPC)?
The minimum price a seller can sell a product for.
What is a price floor?
In this market structure, a single firm dominates and sets prices.
What is a monopoly?
This is the middle part of the returns to scale graph.
What part of the returns to scale graph is constant?
This principle suggests that as you consume more of a good, the additional satisfaction decreases.
What is the law of diminishing marginal utility?
When a producer can provide a good or service in greater quantity for the same cost, or the same quantity at a lower cost, than its competitors.
What is absolute advantage?
As the price of a good increases, the quantity supplied increases, and vice versa.
What is the law of supply?
This term describes the situation where firms produce at the lowest possible cost.
What is productive efficiency?
This is the left part of the returns to scale graph.
What part of the returns to scale graph is increasing?
Products/services that can only be consumed by one user or a limited number of users.
What are Rival goods?