Econ!

Definitions

100

Economics 

The study of “scarcity” and choice 

200

Scarcity

we have unlimited wants but limited resources.

Since we are unable to have everything we desire, we must make choices regarding  how we will use our limited resources

300

Explicit Costs

Explicit costs are costs that involve an “outlay” 

Of any resource, most often money (e.g. price of a movie ticket)

400

Implicit Costs

Costs that do not involve an outlay (e.g. the forgone time or wage one could have had when going to the movies).

500

Relatively Elastic Demand

a change in the price of good x leads to a relatively significant change in the quantity demanded.  

Lists/Causes

100

The PPC can “shift” as a result of three changes:

1. Change in resource quantity or quality (e.g. “capital goods”)  

2. Change in Technology

3. Change in Trade* 

200

The “law of demand” is the result of three overlapping effects: 

1. The Substitution Effect 

2. The Income Effect

3. Diminishing Marginal Utility 

300

There are five causes of a shift in demand:

1. Changes in the Prices of Related Goods

2. Changes in Consumer Income

3. Changes in Tastes/Preferences

4. Changes in Expectations of  Price

5. Changes in Population

400

Five Determinants of Elasticity of Demand

Substitutes, Proportion of income, Luxury vs. Necessity, Addictive/Habit-forming Quality, Time

500

There are two key assumptions of the PPC:

1. There are only two goods produced 

2. The “entity” (e.g. country, firm) is using all its resources when producing at points along the curve

basic concepts

100

The concept that refers to the value of the next best alternative that must be forgone when a decision is made.

opportunity cost

200

The term for the various quantities of a good or service that producers are willing to sell at different market prices.

supply

300

This economic concept refers to the increase in the general price level of goods and services over time.

inflation

400

The term for the measure of responsiveness of quantity demanded or quantity supplied to a change in price.

elasticity

500

This principle suggests that as the quantity of a good or service consumed increases, the additional satisfaction or utility derived from each additional unit decreases.

What is the law of diminishing marginal utility?

random

100

The term for goods that are consumed together, like peanut butter and jelly.

complementary goods

200

The economic term for a sudden, widespread decline in the economy.

recession

300

The place where buyers and sellers come together to trade goods and services.

market

400

The term for goods that are not necessary for survival but add comfort or pleasure.

luxury goods

500

The concept of not spending more money than you earn.

What is living within your means