ECON 2301 unit 1

purposeful behavior

Rational self-interest Individuals and utility Firms and profit desired outcome

freedom of enterprise

The freedom of firms to obtain economic resources, to use those resources to produce products of the firm's own choosing, and to sell their products in markets of their choice.

freedom of choice

The freedom of owners of property resources to employ or dispose of them as they see fit, of workers to enter any line of work for which they are qualified, and of consumers to spend their incomes in a manner that they think is appropriate.

economizing problem

limited income and unlimited wants is

change in quantity demanded

movement along the demand curve showing that a different quantity is purchased in response to a change in price

market equilibrium

occurs where the demand curve and supply curve intersect

market system.

shops stock and sell the goods their customers want, but the government levies a sales tax on each transaction in order to fund elementary schools, public libraries, and welfare programs for the poor is an example of what kind of system

invisible hand

term economists use to describe the self-regulating nature of the marketplace

rational function of prices

the ability of he competitive forces of supply and demand to establish a price where selling and buying decisions are synchronized

other-things-equal assumption

the assumption that factors other than those being considered do not change

marginal analysis

the comparison of marginal benefits and marginal costs, usually for decision making

employ the other factors of production take initiative make strategic business decisions innovative take risk

the functions of entrepreneurship

creative destruction

the hypothesis that the creation of new products and production methods simultaneously destroys the market power of existing monopolies

laissez-faire system.

the only taxes levied by the government are to pay for national defense, law enforcement, and a legal system designed to enforced contracts between private citizens is an example of what kind of system

false

true or false? households sell finished products to businesses?

false

true or false? money must be issued by a government for people to accept it

inverse relationships

variables move in opposite directions

invisible hand

"each day, central planners in the old soviet union were tasked with setting 27 million prices - correctly" is an example of what

creative destruction

"if you compare a list of today's most powerful and profitable companies with a similar list from 30 years ago, you will see lots of new entries" is an example of what

invisible hand

"it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest" is an example of what

invisible hand

"managers in the old soviet union often sacrificed product quality and variety because they were awarded bonuses for quotative, not qualitative targets" is an example of what

mutually agreeable

Economic transactions willingly undertaken by both the buyer and the seller because each feels that the transaction will make him or her better off

determinants of demand

Factors other than price that determine the quantities demanded of a good or service.

direct relationships

both variables in the same direction

command system

A method of organizing an economy in which property resources are publicly owned and government uses central economic planning to direct and coordinate economic activities; socialism; communism

demand

A schedule or curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time.

law of increasing opportunity costs

As more of a particular good is produced, its marginal opportunity costs increase

market demand

Horizontal sum of all individual demand curves of all the consumers on the market

law of demand

Other things equal, as price falls, the quantity demanded rises, and as price rises, the quantity demanded falls

law of supply

Other things equal, as the price rises, the quantity supplied rises and as the price falls, the quantity supplied falls

competition

The presence in a market of independent buyers and sellers competing with one another along with the freedom of buyers and sellers to enter and leave the market.

private property

The right of private persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other property.

macroeconomics

The study of the entire economy or a major aggregate of the economy

microeconomics

The study of the individual consumer, firm, or market

self-interest

What each individual or firm believes is best for itself and seeks to obtain

supply curve

a graph of the relationship between the price of a good and the quantity supplied

less than

a price ceiling will result in a shortage only if the ceiling price is ___________ the equilibrium price

supply

a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specific period

economic perspective

a viewpoint that envisions individuals and institutions making rational decisions by comparing the marginal benefits and marginal costs associated with their actions

graph

a visual representation of the relationship between two variables

command system.

a woman who wants to start a flower shop finds she cannot do so unless the central government has already decided to allow a flower shop in her area is an example of what kind of system

laissez-faire capitalism

an economic system in which the means of production and distribution are privately owned and operated for profit with minimal or no government interference.

the production possibility model

an economic model that shows different combinations of two goods than an economy can produce

market system

an economic system in which individuals, not the government control the production and distribution of goods and services; also called capitalism

market

an institution that brings buyers and sellers together

change in resource prices, technology, number of sellers, taxes and subsidies, prices of other goods, producer expectations

determinants of supply

positive economics

economic statements that are factual

normative economics

economic statements that involve value judgements

y = a + bx

equation of a linear relationship

land, labor, capital, entrepreneurial ability

four categories of economic resources

normal goods

goods that we buy more of as our income increases

inferior goods

goods we buy more of as our income decreases

demand curve

illustrates the inverse relationship between price and quantity

markets

interactions between buyers and sellers that are either local, national, or international.