Terms to Know
The cost of the next best alternative
What is Opportunity Cost?
The relationship between a good's price and the amount that people are willing to buy.
What is demand?
A period of temporary economic decline where GDP has fallen in two consecutive quarters.
What is a recession?
A set of rules about how resources are used to produce goods and who gets them.
What is an economic system?
Adam Smith explained that specialization causes this.
What is an improved society?
What is utility and scarcity?
The type of relationship between price and quantity demanded seen in the Law of Supply.
What is inverse?
A situation that occurs when market prices rise because too much money is in circulation.
What is inflation?
What is a planned economy?
The government's use of stimulus and tax cuts to help alleviate a struggling economy or cool down an overheated economy.
What is fiscal policy
Resources that an entity has and combines in order to produce goods.
What are factors of production?
The type of good whose demand decreases when a consumer's income increases.
What is an inferior good?
The value of all finished goods and services produced within a country during a year's time.
What is Gross Domestic Product?
A system where individuals, businesses, and government all play an important role in economic planning.
What is a mixed economy?
When consumers real income increases causing a change in demand for a good or service.
What is the income effect?
When an entity can produce more of a good given the same level of inputs as another entity.
What is absolute advantage?
A good that is perceived as not having substitutions and therefore consumers continue to demand the good regardless of price.
What is an inelastic good?
The recurrent fluctuations in the level of economic activity - booms and busts.
When individuals own the factors of production and the government remains "hands off".
When only 1 business supplies all of the good in a specific industry and is able to control the price.
What is a monopoly?
The ability to produce a good at a lower opportunity cost that is lower than that of another producer.
What is comparative advantage?
The law that determines that when a price goes up for a good the quantity supplied also increases.
What is the Law of Supply?
The number of unemployed people in an economy divided by the number of people in the labor force.
What is the Unemployment Rate?
The most extreme example of a command economy in existence today is seen in this country.
What is North Korea?
A decrease in demand for a good because a cheaper alternative is available.
What is the substitution effect?