In the Beginning . . .
Wanting more than we can get with available resources. The presence of this necessitates rationing.
What is scarcity?
Characterized by a straight line, this term describes a situation in which the tradeoffs between production alternatives do not change as more of one good is produced.
What is Constant Opportunity Cost?
This is the amount buyers are willing and able to purchase at a given price.
What is Quantity Demanded?
This is the maximum price that a buyer would be willing to pay for a good or service.
What is Willingness to Pay (or Reservation Price)?
This is a regulation that sets a maximum or minimum legal price for a particular good.
What is a Price Control?
This is an assumption that helps economists explain how people behave. It is characterized by individuals acting in a way that will best achieve his/her goals.
Production alternatives located along the production possibilities frontier. Two characteristics.
What are attainable and efficient?
Consumers purchase more of this type of good when their incomes decrease.
What are Inferior Goods?
This is the net benefit that a producer receives from the sale of a good or service. It is measured by the difference between the producer's willingness to sell and the actual price.
What is Producer Surplus?
This is the minimum legal price at which a good can be sold.
What is a Price Floor?
This is the value of the next best alternative that has to be given up.
What is opportunity cost?
The ability to produce more of a good or service than others with a given quantity of resources.
What is Absolute Advantage?
This describes the quantity producers are willing and able to sell over a series of prices.
What is Supply?
A measure of the combined benefits that everyone receives from participating in an exchange of goods or services.
What is Total Surplus?
This is the difference between the price paid by buyers and the price received by sellers in the presence of a tax.
What is a Tax Wedge?
This entails comparing additional benefits to additional costs to help with decision-making.
What is Marginal Analysis?
The characteristic of being able to produce a good or service at a lower opportunity cost.
What is Comparative Advantage?
What is a Shortage?
This is an arrangement such that no exchange can make anyone better off without someone becoming worse off.
What is an Efficient Market?
This is a requirement that the government pay an extra amount to producers or consumers of a good.
What is a Subsidy?
This is a consistently observed relationship between two variables.
What is Correlation?
This describes the improvement in outcomes that occurs when producers specialize based on comparative advantage and exchange goods and services.
What are the Gains from Trade?
When this occurs, the equilibrium price decreases, and the equilibrium quantity increases.
What is an Increase in Supply?
This is the loss of total surplus that occurs because the quantity of a good that is bought and sold is below the market equilibrium quantity.
What is Deadweight Loss?
The goal of this type of policy is to keep consumer costs low. When it is enacted and binding, quantity demanded increases and quantity supplied decreases.
What is a Price Ceiling?