Supply & Demand
An increase in price, holding all else constant, causes this change in quantity demanded.
What is a decrease in quantity demanded?
This is the value of the next best alternative that must be given up when a choice is made.
What is opportunity cost?
These rights specify how resources can be owned, used, and transferred.
What are property rights?
This economic agent combines resources and takes risks to produce goods and services.
What is an entrepreneur?
For this type of good, demand rises when income rises.
What is a normal good?
This measures the additional benefit from consuming one more unit of a good.
What is marginal benefit?
This occurs when quantity supplied equals quantity demanded.
What is market equilibrium?
This curve slopes upward because higher prices encourage producers to offer more for sale.
What is the supply curve?
This economic concept explains why individuals focus on tasks they perform best.
What is specialization?
Strong property rights tend to encourage this type of economic activity.
What is investment?
Entrepreneurs earn this when revenues exceed costs.
What is profit?
For this type of good, demand falls when income rises.
What is an inferior good?
This measures the additional cost of producing one more unit.
What is marginal cost?
A price above equilibrium causes this market condition.
What is a surplus?
A technological improvement in production will most directly cause this shift.
What is a rightward shift of the supply curve?
When individuals or nations trade voluntarily, both sides benefit because of differences in this.
What is opportunity cost (or comparative advantage)?
When property rights are poorly defined, this economic problem often arises.
What is the tragedy of the commons?
Entrepreneurs play a key role in markets by introducing this.
What is innovation?
Fast food is often considered this type of good when consumers’ incomes increase.
What is an inferior good?
Rational decision-makers continue an activity as long as marginal benefit is this relative to marginal cost.
What is greater than or equal to?
A price below equilibrium causes this market condition.
What is a shortage?
An increase in consumer income for a normal good causes this market change.
What is an increase in demand (rightward shift of demand)?
A country that produces goods at a lower opportunity cost than others has this advantage.
What is comparative advantage?
Clearly enforced property rights reduce uncertainty and encourage this behavior among firms.
What is long-term planning (or capital investment)?
If an entrepreneur expects losses rather than profits, they are less likely to do this.
What is enter the market (or start a business)?
If income decreases, demand for inferior goods will do this.
What is increase?
The optimal level of an activity occurs where these two are equal.
What are marginal benefit and marginal cost?
When a surplus exists, market forces push prices in this direction.
What is downward?
If both supply and demand increase, but demand increases more than supply, the equilibrium price will do this.
What is increase?
Even if one country is better at producing everything, trade can still be beneficial because of this principle.
What is comparative advantage?
Countries with weak property rights often experience lower economic growth because incentives for this are reduced.
What is innovation (or entrepreneurship)?
In a market economy, profits and losses serve as this type of signal to entrepreneurs.
What are incentives (or signals about consumer preferences)?
Whether a good is normal or inferior depends on this factor.
What is consumer preferences (or income levels)?
Producing beyond the point where marginal cost exceeds marginal benefit leads to this outcome.
What is inefficiency (or a net loss)?
Market equilibrium reflects the balance of these two forces.
What are supply and demand?