Basic Economic Problem 1
non-physical items that can be provided by firms and paid for by customers.
services
the cost measured in terms of the next best choice given up when making a decision.
Opportunity cost
the willingness and the ability of costumers to pay a given price to buy good or service.
Demand
The ability and willingness of firms to provide goods and services at given price levels
Supply
The position where demand for a product is equal to the supply of the product.
market equilibrium
Three basic economic questions
what, how and for whom to produce?
A diagram that represents the productive capacity (maximum output) of an economy.
Production Possibility Curve (PPC)
The amount of a good and service demanded at each price level.
Quantity demanded
The sum of all supply at each price level.
Market supply
the price at which the demand curve for a product intersects the supply curve for the product
Equilibrium price
The human resources required in the production process
labor
The study of particular markets and sections of the economy (rather than the economy as a whole)
Microeconomy
Inverse relationship between the price of goods or services and the quantity demanded.
Law of demand
There is a positive relationship between price and the quantity supplied.
Law of supply
the quantity demanded for a product is either higher or lower than the quantity supplied.
Market disequililbrium
This contains firms that manufacture goods and change raw materials into finished products, and also construct buildings, roads and bridges.
secondary sector
when the market price is either above or below the equilibrium price.
Market disequililbrium
Goods and services that can be used instead of each other.
Substitutes
A form of financial assistance from the government to help encourage output by reducing the costs of production for firms.
Subsidies
If the selling price of a product is set too high (above the equilibrium), supply will exceed demand
surplus
the ease with which a person is able to change between jobs.
Occupational mobility
An economic system that relies on government to organize its all resources
Planned economy
The sum of all individual demand for a product.
Market demand
A price rise will cause an __________ in the quantity supplied of a product
extension
If the selling price of a product is set too low (below the equilibrium), then demand will exceed supply
Shortage