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Defining Economics
Scarcity and the World of Trade-Offs
Supply and Demand
Extensions of Demand and Supply Analysis
Elasticity and Externalities
100
The study of how people allocate their limited resources in an attempt to satisfy their unlimited wants.
What is economics?
100
The highest-valued, next-best alternative that must be sacrificed to attain something or to satisfy a want.
What is an opportunity cost?
100
At higher prices a lower quantity will be demanded than at lower prices, other things being equal.
What is the law of demand?
100
Buyers and sellers transact with a minimum amount of governmental interference.
What is a price system/free enterprise?
100
The responsiveness of the quantity demanded of a commodity to changes in its price.
What is the price elasticity of demand?
200
The assumption that individuals do not intentionally make decisions that would leave them worse off.
What is the rationality assumption?
200
A situation in which the ingredients for producing the things that people desire are insufficient to satisfy all wants at zero price.
What is scarcity?
200
Intersection of the demand curve and the supply curve when piloted on the same graph (price vs quantitative).
What is the Equilibrium (market clearing) Price
200
A market in which goods are traded at prices above their legal maximum price or in which illegal goods are sold.
What is the Black market
200
The formula for price elasticity of supply.
What is the percentage change in quantity supplied divided by the percentage change in price?
300
The assumption that all other thing remain constant.
What is ceteris paribus?
300
A production level impossible to attain.
What is point outside the production possibilities curve?
300
Surplus
What is a situation in which the quantity supplied is greater than the quantity demanded at a price above the market clearing price
300
A type of price ceiling only referring to the rent of real estate.
What is rent control
300
The graphical representation of a perfectly elastic supply.
What is a horizontal line?
400
Subjective and deals with value jedgements, or with what ought to be.
What is normative economics?
400
People have an economic incentive, absolute advantage exists, and/or the process of division of labor increases output?
What are reasons why specialization occurs?
400
All of the arrangements that individuals have for exchanging with one another.
What is market
400
The synchronization of decisions by buyers and sellers that leads to equilibrium.
What is the rationing function of prices.
400
Measures that the government can take in order correct the underallocation of resources due to a positive externality.
What is financing additional production by providing special subsidies or by regulation?
500
They relate to behavior, not thought processes.
What are economic models?
500
The five factors of production?
What are land, labor, physical capital, human capital, and entrepreneurship.
500
seasonal, substitutes, compliments, weather, change in taste, change in income, and quality.
What are examples of non-price factors?
500
Conditions that make it hard to predict the effects on the equilibrium quantity and equilibrium price.
What are shifts of both the demand and supply curves
500
The three major determinants of the price elasticity of demand.
What are the availability of substitutes, the proportion of total expenditures that people allocate to a good, the length of a price change?