Econ Ch. 1-5
if someone pays $50 for a pair of shoes, and the actual price of the shoes is $30, their marginal benefit is
$50
a price ceiling is a price
above which a seller cannot legally sell
goods and services produced at lowest possible cost in quantities that provide greatest benefits
allocative efficiency
growth of capital resources
capital accumulation
activity a person can preform at a lower opportunity cost than anyone else
comparative advantage
a good that is used in conjunction with another good
complement
excess of the benefit received from a good over the amount paid for it
consumer surplus
%age change in quantity demanded/%age change in price of a substitute or complement
cross elasticity of demand
decrease in total surplus that results from an inefficient level of production
deadweight loss
in order to societies to reap the gain from trade, it is necessary to
define and enforce property rights
the producer surplus on a unit of a good is the
difference between the price of the good and the marginal cost of producing the good
consumer surplus is the ______________ summed over the quantity bought
difference between the value of a good or service and the price paid for the good or service
moving along a PPF, marginal cost is
equal to the opportunity cost of producing one more unit of a good or service
when demand decreases and supply does not change, the equilibrium price _________ and the equilibrium quantity ___________
falls; decreases
%age change in quan demanded/%age change in income
income elasticity of demand
when the price of a normal good falls, the substitution effect leads to ______________ in the quantity purchased and the income effect leads to ___________ in the quantity purchased
increase; increase
an increase in the number of fast food restaurants
increases the supply of fast food meals
relationship between the price of a good and the quan. demanded by a person
indiv demand
demand decreases and income increases
inferior good
capital earns
interest
factors of production include
land, labor, capital, and entrepreneurship
Economics is best defined as the study of how people, businesses, governments, and societies
make choices to cope with scarcity
the max. amount a person is willing to pay for one more unit of good
marginal benefit
any arrangement that enables buyers and sellers to get info and do business with each other
market
relationship between price of a good and quan. demanded by all buyers
market demand
resources are _____________ when they are assigned to tasks for which they are not the best match
misallocated
demand increases as income increases
normal good
a shortage causes the
price to rise
Production efficiency is achieved when
producing one or more unit of good cannot occur without producing less of some other good
depicts the boundary between those combinations of goods and services that can be produced and those that cannot given the resources and current state of technology
production possibilities frontier (ppf)
entreupenuership earns
profit
if the demand for a good is elastic, when the price increases, the
quantity demanded will decrease by a greater percentage than the price increased
the ratio of one price to another
relative price
land earns
rent
elasticity generally measures the
responsiveness of a variable to a change in another variable
the largest part of what the US produces today is ___________ such as ___________________
services; trade and health care
development of new goods and of better ways of producing goods and services
technological change
tradeoff between efficiency and fairness
the big tradeoff
the opportunity cost of any action is
the highest-value alternative forgone
producers' total revenue will increase if
the price rises and the demand is inelastic
the "law of supply" refers to the fact that, all other things remaining the same, when the price of a good rises
there is a movement up along the supply curve to a larger quantity supplied
the "law of demand" refers to the fact that, all other things remaining the same, when the price of a good rises
there is movement up along the demand curve to a smaller quantity demanded
production efficiency
to produce goods and services at the lowest possible cost
the price of the good x the quantity sold
total revenue
method of estimating the price elasticity of demand by observing the change in total revenue that results from a change in the price
total revenue test
resources are ____________ when they are idle but could be working
unused
labor earns
wages
