Macro1

Quantity Supplied

(The Quantity Supplied) is the amount of a good or service that producers are willing and able to sell at the current price.

Absolute Advantage

refers to the ability of one producer to make more than another producer with the same quantity of resources.

Equilibrium Price

(The Equilibrium Price) is the price at which the quantity supplied is equal to the quantity demanded. This is also known as the market-clearing price.

Equilibrium Quantity

(The Equilibrium Quantity) is the amount at which the quantity supplied is equal to the quantity demanded.

Law of Demand

(The Law of Demand) states that, all other things being equal, quantity demanded falls when prices rise, and rises when prices fall.

Law of Supply

(The Law of Supply) states that, all other things being equal, the quantity supplied of a good rises when the price of the good rises, and falls when the price of the good falls.

Markets

bring buyers and sellers together to exchange goods and services.

Positive Statement

can be tested and validated; it describes "what is."

Capital Goods

help produce other valuable goods and services in the future.

Incentives

are factors that motivate a person to act or exert effort.

Consumer Goods

are produced for present consumption.

Inputs

are resources used in the production process.

Substitutes

are two goods that are used in place of each other. When the price of a substitute good rises, the quantity demanded falls and the demand for the related good goes up.

Complements

are two goods that are used together. When the price of a complementary good rises, the demand for the related good goes down.

Competitive Market

exists when there are so many buyers and sellers that each has only a small impact on the market price and output.

Law of Increasing Relative Cost

states that the opportunity cost of producing a good rises as a society produces more of it.

Demand Curve

(A Demand Curve) is a graph of the relationship between the prices in the demand schedule and the quantity demanded at those prices.

Shortage

(A Shortage) occurs whenever the quantity supplied is less than the quantity demanded.

Supply Curve

(A Supply Curve) is a graph of the relationship between the prices in the supply schedule and the quantity supplied at those prices.

Surplus

(A Surplus) occurs whenever the quantity supplied is greater than the quantity demanded.

Monopoly

(A monopoly) exists when a single company supplies the entire market for a particular good or service.

Imperfect Market

(An Imperfect Market) is one in which either the buyer or the seller has an influence on the market price.

Inferior Good

(An Inferior Good) is purchased out of necessity rather than choice.

(Break1)

(Break1)

(Break2)

(Break2)

(Break3)

(Break3)

Normal Good

(Consumers buy more of a normal good) as income rises, holding other things constant.

Market Economy

(In a Market Economy) resources are allocated among households and firms with little or no government interference.

Law of Supply and Demand

(The Law of Supply and Demand) states that the market price of any good will adjust to bring the quantity supplied and the quantity demanded into balance.

Quantity Demanded

(The Quantity Demanded) is the amount of a good or service that buyers are willing and able to purchase at the current price.

Production Possibilities Frontier

is a model that illustrates the combinations of outputs that a society can produce if all of its resources are being used efficiently.

Normative Statement

is an opinion that cannot be tested or validated; it describes "what ought to be."

Ceteris Paribus

is the concept under which economists examine a change in one variable while holding everything else constant.

Opportunity Cost

is the highest-valued alternative that must be sacrificed in order to get something else.

Investment

is the process of using resources to create or buy new capital.

Economics

is the study of how people allocate their limited resources to satisfy their nearly unlimited wants.

Microeconomics

is the study of the individual units that make up the economy.

Macroeconomics

is the study of the overall aspects and workings of an economy.

Market Demand

is the sum of all the individual quantities demanded by each buyer in the market at each price.

Market Supply

is the sum of the quantities supplied by each seller in the market at each price.

Trade

is the voluntary exchange of goods and services between two or more parties.

Equilibrium

occurs at the point where the demand curve and supply curve intersect.

Scarcity

refers to the limited nature of society's resources, given society's unlimited wants and needs.

Comparative advantage

refers to the situation where an individual, business, or country can produce at a lower opportunity cost than a competitor can.