Chapter 2
The study of how households and firms make decisions and how they interact in markets.
Microeconomics
The ability to produce a good using fewer inputs than another producer.
Absolute advantage
This law explains the downward slope of the demand curve.
Law of demand
The method you will all use to calculate price elasticity.
Midpoint method
These policies are introduced if lawmakers believe that the market price is unfair to buyers or sellers.
Price controls
These statements are descriptive.
Positive statements
Whatever must be given up to obtain some item.
Opportunity Cost
This means that if the price of chocolate goes up, I will buy less peanut butter.
Complementary goods
These goods have a negative income elasticity.
Inferior goods
A legal maximum on the price at which a good can be sold.
Price ceiling
These statements are prescriptive.
Normative statements
This principle states that each good should be produced by the individual that has the smaller opportunity cost of producing that good.
Principle of comparative advantage
Where quantity supplied = quantity demanded.
Equilibrium
The flatter the demand curve, the greater this is.
Price elasticity of demand
These are used to raise revenue and influence market outcomes.
Taxes
The study of how societies allocate their scarce resources among competing uses.
Economics
These goods are produced domestically and sold abroad.
Exports
Where Quantity demanded far outpaces quantity supplied.
Shortage
This numbers shows how much the quantity demanded of a good responds to a change in consumers' income.
Income elasticity of demand
A legal minimum on the price at which a good can be sold.
Price floor
DAILY DOUBLE!!
How much would you like to wager?
Draw a Production Possibility Frontier. Label a point that is efficient, a point that is not efficient, and a point that is impossible.
These goods are produced abroad and sold domestically.
Imports
In this type of market, we assume that all buyers and sellers are price takers.
Perfectly competitive market.
These goods have a positive cross-price elasticity.
Substitutes
Economists broadly disagree that this policy has had a positive impact on affordable rental houses.
Rent controls