Microeconomics

suppose a farmer produces both beans and corn on her farm. If she must give up 16 bushels of corn to be able to get 6 bushels of beans, then her opportunity cost of 1 bushel of beans is

2.67 bushels of corn

british economist, cosidered the father of the modern theory of supply and demand

Alfred Marshall

factors of production can be used in either widget or gizmo production but some are more productive producing widgets, and some at producing gizmos

PPF increasing opportunity costs

a shift in the demand curve can be cause by

a change in one of the determinants of demand

one country can produce more of a good than another country

absolute advantage

the mix of goods and services produced is just what the society desires

allocative efficiency

Farmer Cameron's tractor Kyle's Taco Truck (the truck itself)

capital

includes manufactured products such as tractors, welding equipment, and computers that are used to produce other goods and services

capital

assumption used in economics where other relevant factors or variables are held constant

ceteris paribus

occurs when one or more of the determinants of demand changes, shown as a shift in the entire demand curve

change in demand

occurs when the prices of the product changes, shown as a movement along an existing demand curve

change in quantity demanded

occurs when the price of the product changes, shown as a movement along an existing supply curve

change in quantity supplied

occurs when one or more of the determinants of supply change, shown as a shift in the entire supply curve

change in supply

one country has a lower opportunity cost of producing a good than another country

comparative advantage

goods that are typically consumed together

complementary goods

examples: tastes and preferences fall income falls price of complements rises number of buyers falls

decrease in demand

examples: technology falls resource costs rise number of sellers falls

decrease in supply

the max amount of a product that buyers are willing and able to purchase over some time period at various prices, holding all other relevant factors constant

demand

a graphical illustration of the law of demand, which shows the relationship between the price of a good and the quantity demanded

demand curve

a table that shows the quantity of a good a consumer purchases at each price

demand schedule

nonprice factors that affect demand, including tastes and preferences, income, prices of related goods, number of buyers, and expectations

determinants of demand

nonprice factors that affect supply, including production technology, costs of resources, prices of other commodities, expectations, number of sellers, and taxes and subsidies

determinants of supply

the study how individuals, firms, and society make decisions to allocate limited resources to many competing wants

economics

how well resources are used and allocated

efficiency

sandy uses her life's savings and her grandma's recipe to start producing aunt sandy's jamming jellies

entrepreneurs

when one combines land, labor, and capital to produce goods and services and they assume the risks associated with running a business

entrepreneurs

during the summer, a bumper crop of oranges in florida causes a surplus in the supply of oranges nationwide. as a result, prices fall to compensate for the surplus and civilians enjoy the fruits of the farmers labor

equilibrium

market forces are in balance when the quantities demanded by consumers just equal the quantities supplied by producers

equilibrium

market equilibrium price is the price that results when quantity demanded is just equal to quantity supplied

equilibrium price

market equilibrium quantity is the output that results when quantity demanded is just equal to quantity supplied

equilibrium quantity

the fairness of various issues and policies

equity

production efficiency

goods and services are produced at their lowest possible resource cost

the local river has so much pollution that three-eyed fish are forming. the government responds by regulating the amount of chemicals that can be dumped into the river

government intervention

market demand and supply curves are found by adding together how many units of the product will be purchased or supplied at each price

horizontal summation

the factors that motivate individuals and firms to make decisions in their best interest

incentives

examples: taste and preferences rise income rises price of substitutes rises number of buyers rises

increase in demand

examples: technology rises price of production substitute falls taxes fall or subsidies rise

increase in supply

a good for which an increase in income results in declining demand

inferior good

markets

institutions that bring buyers and sellers together so they can interact and transact with each other

Peyton, a server at Sonic Your coworkers Your favorite bartender

labor

includes the mental and physical talents of individuals who produce products and services

labor

Ore, The Rio Grande, Lake Havasu

land

includes natural resources such as mineral deposits, oil, natural gas, water, and land i the usual sense of the word.

land

holding all other relevant factors constant, as price increases, quantity demanded falls, and as price decreases, quantity demanded rises

law of demand

holding all other relevant factors constant, as price increases, quantity supplied will rise, and as price declines, quantity supplied will fall

law of supply

when trading with more developed countries,

less developed countries have a comparative advantage in the production of some goods or services

as a result of a severe recession, the total output or gross domestic product of a nation falls by 4%

macro

increased consumer spending causes the national unemployment rate to fall

macro

increased consumer spending causes the rate of inflation to rise

macro

the broader issues in the economy such as inflation, unemployment, and national output of goods and services

macroeconomics

an educational software company wants to expand number of economics questions that it offers and is considering hiring another economist. it compares how much adding another worker will improve the product with the additional cost

marginal decisions

the owner of a snow cone trailer realizes that the demand for snow cones is low during the winter and thus, closes shop until the temperature warms back up near summertime

market efficency

institutions that bring buyers and sellers together so they can interact and transact with each other

markets

a tax on tires increases the price of tires paid by car owners

micro

optimism about future car sales leads general motors to hire more auto workers

micro

the decision making by individuals, businesses, industries, and governments

microeconomics

robotic technology reduces the demand for auto workers

microf

a good for which an increase in income results in rising demand

normal good

Positive or normative? the richest 1% of americans should pay more taxes than the rest of the 99%

normative

positive or normative? social welfare spending in sweden occupies too large a portion of the national budget

normative

a question that is based on societal beliefs on what should or should not take place

normative question

absolute advantage

one country can produce more of a good than another country

comparative advantage

one country has a lower opportunity cost of producing a good than another country

on black friday, there are huge sales. david must decide between buying a camera at one store or a flat screen tv at another sotre, and buying one means lowing out on the ability to purchase the other

opportunity cost

the cost paid for one product in terms of the output (or consumption) of another product that must be forgone

opportunity cost

the value of the next best alternative; what you give up to do something or purchase something

opportunity cost

Positive or normative? a decrease in the supply of coconut will increase the price of german chocolate cake, a good which required coconut shavings as a key ingredient

positive

Positive or normative? the higher the minimum wage, the highers the price of goods and services is likely to be

positive

a question that can be answered using available information or facts

positive question

a name given to the market economy because prices provide considerable information to both buyers and sellers

price system

the process of converting resources, land labor capital and entrepreneurial ability, into goods and services

production

goods and services are produced at their lowest resource (opportunity) cost

production efficiency

shows the combinations of two goods that are possible for a society to produce at full employment

production possibilities frontiers PPF

ava finds that there is not enough time after work to have dinner, exercise, and watch tv, and she must make choices about how to use her limited time

resource scarcity

land, labor, capital, entrepreneurial ability

resources

our unlimited wants clash with limited resources

scarcity

occurs when the price is below market equilibrium and quantity demanded exceeds quantity supplied

shortage

at a high end restaurant, the restaurant owner has one chef at a meat station, one at veggies..... the result is increased speed, as more customers get serviced during an evening

specialization

goods consumers will substitute for one another depending on their relative prices

substitute goods

the maximum amount of a product that sellers are willing and able to provide for sale over some time period at various prices, holding all other relevant factors constant

supply

a graphical illustration of the law of supply, which shows the relationship between the price of a good and the quantity supplied

supply curve

occurs when the price is above market equilibrium, and quantity supplied exceeds quantity demanded

surplus

allocative efficiency

the mix of goods and services produced is just what the society desires

you have to give one thing up in order to consume another

tradeoffs

an individual's valuation of a good or service, equal to the most an individual is willing and able to pay

willingness-to-pay