Exam 1 Study Guide for Macroeconomics
Law of Supply
As the price of a good/service declines, the quantity demanded will decrease. Vice versa.
Law of Demand
As the price of a good/service declines, the quantity demanded will increase. Vice versa.
Supplementary Goods
As the price of a supplementary good increases, the demand for the supplemented good increases. Vice versa.
Determinants of Demand
Factors that cause the entire demand curve to shift left or right, including income, consumer preferences, consumer expectations, and cost of related goods.
Determinants of Supply
Factors that cause the entire supply curve to shift left or right, including technological change, change in resource costs, producer expectations, and taxes and regulations.
Right to Property
A basis for society in which an individual has ownership and control over an inanimate object they acquired within the norms of society.
Right to Enterprise
A basis for society in which an individual has the freedom to use the property they own and their own physical capacity to produce and exchange that produce within the market for things they want and need.
Complimentary Goods
As the price of a complimentary good declines, the demand for the complimented good increases. Vice versa.
Inefficient Voting
A concept where a majority vote leads to a less than optimal outcome for society.
Quasi Good
A good that can be excludable but is rivalrous, or something that can be rivalrous but not excludable.
Private Good
A good that is both excludable and rivalrous.
Public Good
A good that is neither excludable nor rivalrous.
Production Possibility Frontier
A graph that shows the trade-off between the amount of two goods that can be produced given limited resources. Only an increase in resources available can shift the curve outward; only a decrease in resources could shift the curve inward.
Paradox of Voting
A phenomenon when voter preferences are inconsistent or illogical.
Rent Seeking
An appeal to governing authority for special benefits at the taxpayers' expense.
Markets
An institution that brings buyers and sellers together.
Inferior Goods
As income rises, the demand for the good declines. Vice versa.
Means of Production
Land, Labor, Real Capital, Entrepreneurship
Invisible Hand
Resources are distributed efficiently and effectively throughout the economy by the interaction of consumers and buyers acting in their own self-interest.
Centralized (Command) System
Scarce resources are owned and allocated by a central decisionmaker making decisions based on the long-term priorities of the central decisionmaker.
Decentralized (Market) System
Scarce resources are owned and allocated by consumers and producers acting in their own self-interest.
Positive Economic Statements
Statements based on fact or reality.
Normative Economic Statements
Statements based on values or normality.
Circular Flow Model
The model which shows that Households sell resources (Land, Labor, Capital, Innovativeness) to Firms via the Resource Market in exchange for income and then buy goods and services from Firms in the Goods Market.
Opportunity
The next best thing that must be foregone to produce an additional unit of a given good. The next best choice when making a decision.
Diminishing Marginal Utility
The principle that the more a person consumes, the less benefit (joy) that the person receives from said good for each unit or time consuming it.
Creative Destruction
The process by which entrepreneurs create new inventions which cause existing goods to become outdated, thus causing the bankruptcy of firms and the loss of jobs for workers.
Macroeconomics
The study of aggregates within the economy.
Microeconomics
The study of the economic behaviors of individuals, firms, and industries.
Medium Voter Theorem
The theory that candidates will chase the political center given that the voting spectrum represents a bell curve.
Regulatory Capture
When an agency designed to regulate an industry is led by experts within the industry who have an interest in that industry.
