Intro + Economic Institutions
One or more persons living under the same roof that have the ability to participate in the economy
What you sacrifice to get something else
What is opportunity cost
Create competition among suppliers, which promotes more efficiency, lower prices, quality.
What are Markets?
What is the movement of money?
Price and quantity vary inversely, ceteris paribus, thus the higher the price, the lower the quantity
What is the Law of Demand?
Land, Labor, Capital, and (arguably) entrepreneurship
What are the factors of production? (aka: Inputs)
extra cost or benefit resulting from a 1 unit incremental change in a given activity
What is marginal benefit/cost
Rejected the idea of Mercantilism and created the notion of "the invisible hand."
Who is Adam Smith?
Where business firms that produce market for other goods
Product Market
The market determines the price and we adjust our decisions to the change in prices
Who are price takers?
What is or will be.
What is positive economics?
A 1 input increases, output will increase at a decreasing rate, ceteris paribus
Diminishing Marginal Returns
Ability for household, business firm, or government to produce at a lower absolute resource cost
What is absolute advantage
Transfer payment to businesses that encourage some sort of production.
What is a subsidy
Where price will produce into and out of the market
What is the market clearing price?
The three abilities of the household
Earn income, consume, and save
Corrects mistakes in the allocation of resources and anyone who participates assumes they will be better off from it.
What is Voluntary Exchange
The ability of a household, business firm, or government to produce at a lower opportunity cost
What is Comparative Advantage?
What is the flow of money from a business to the factors market
What is money cost?
When people move out of a small town to a big city, what happens to the demand for housing
What is a decrease in demand and decrease in price and Qd.
Provides external benefits and costs we would not provide ourselves
What is the government?
Shows possible combinations of production an economy can produce when fully utilizing its factors of production
What is the Productions Possibilities Curve/Frontier
What is the flaw mercantilist found in Adam Smith's Theory of Absolute Advantage?
(Don't have to answer in question format)
When one person is better at producing both goods.
The movement of resources from the product market to household
What is product demand?
Paper mills expect a tax to be placed timber needed to make their paper.