Econ final

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price ceiling

A legal maximum price for a good or service -binding price sets price below equilibrium

flow, stock

income is a ______ variable. Wealth is a _______ variable.

positive economics

objective statements that can be tested, amended, or rejected by referring to the available evidence ex. if the government raises taxes on beer, this will lead to a fall in profits for the brewers

market period

output and number of firms are fixed

more elastic

over long periods of time, demand tends to be

partnership

ownership is distributed among a small number of people. This type of business is subject to unlimited liability.

scarcity

people have limited resources

market failure

when free markets provide a suboptimal amount of goods and services -occurs when either external costs or benefits are present -sometimes the government intervenes

relative poverty

when households receive 50% less than average median income (changes with economic growth)

normal good

when income elasticity is a positive number less than 1, the good is a

inferior good

when income elasticity is negative, the good is a

luxury good

when the income elasticity is greater than 1, the good is a

Gini Coefficient

A measure of income inequality within a population that ranges from zero (perfect equality) to 1 (or 100) in the case of absolute inequality.

allocative efficiency

A state of the economy in which production is in accordance with consumer preferences -will occur when marginal price= marginal cost

regressive tax

A tax for which the percentage of income paid in taxes decreases as income increases

progressive tax

A tax for which the percentage of income paid in taxes increases as income increases

the equity-efficiency trade-off

Actions intended to make economic outcomes fairer can cause efficiency to decrease

Lorenz curve

Graph showing how much the actual distribution of income differs from an equal distribution- the extent to which the curve sags below a straight diagonal line indicates the degree of inequality of distribution.

0, 1

If an economy's income is completely equally distributed, then the value of its Gini coefficient is ____. If an economy's income is completely unequally distributed, then the value of its Gini coefficient is ____.

price gouging

Pricing products unreasonably high when the need is great or when consumers do not have other choices ex. price of sleeping bags increases after deadly tornado ruins many homes

$3594

Suppose that the least expensive plan with which a family of four can provide itself a nutritionally balanced meal plan in 1963 is $1198. Given this information, what is the poverty threshold in 1963 for a family of four?

income deficit

The depth of poverty measurement that is the difference between the poverty threshold and a family's income is called the

Assymetric information

When one party to a transaction has access to relevant information that the other party doesn't ex. doctor

external benefit

a benefit received by people other than the consumers or producers trading in the market ex. moving into an apartment above a donut shop b/c you love the smell of donuts

external cost

a cost paid by people other than the consumer or the producer trading in the market ex. the smell of donuts makes you sick, so you don't move into an apartment above a donut shop

rivalrous and excludable goods

a item that is possible to prevent someone from using; usually payment is required ex. no one can enjoy a t-shirt without buying it

price floor

a legal minimum price for a good or service -binding price that sets price above the equilibrium

perfect competition

a market structure in which a large number of firms all produce the same product

cross-price elasticity of demand

a measure of how much the quantity demanded of one good responds to a change in the price of another good, computed as the percentage change in quantity demanded of the first good divided by the percentage change in the price of the second good

explicit costs

accountants include only _________ costs

diminishing returns

an additional worker adds less to total output than the previous worker hired

market

an economic institution that facilitates interactions between buyers and sellers -exists when people exchange money for goods and services -will always tend toward equilibrium

marginal decisions

an examination of the additional benefits of an activity compared to the additional costs incurred by that same activity. Companies use this as a decision-making tool to help them maximize their potential profits

the law of demand

as the price of a good increases, buyers are willing and able to purchase less

market-oriented activities

buyers/sellers make all production/consumption decisions

relatively low

compared to less developed nations, income inequality in the United States is ______________

relatively high

compared to other economically advanced nations, income inequality in the United States is ____________

absolute poverty

condition where household income is insufficient to afford basic necessities from life (food, shelter) -determined by specific-numerical value threshold

more elastic

demand for a luxury item tends to be

more elastic

demand for an item that uses a large portion of your budget tends to be

inferior good

describes a good whose demand drops when people's income rises; anything a consumer would demand less of if they had a higher level of income ex. raise at work means no more frozen pizzas

normal good

describes a good whose demand increases as people's income or the economy rises; income elasticity coefficient that is positive, but less than 1 ex. loosing clients means buying less smoothies- smoothies are what?

lower

economic profit is typically _______ than accounting profit

market economy

economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets

explicit, implicit

economists include both _________ and ________ costs

tradeoffs

everything you do requires giving up something (time, money, etc)

short run

firms can employ more labor if needed

long run

firms can enter and exit an industry

Ceteris Paribus

holding all else equal (unchanged)

Income Elasticity

how responsive quantity demanded is to change in income

near poor

if a family's ratio of income to poverty measurement is 1.07, the family is considered by the Census Bureau as

unit elastic

if the price effect is equal to the quantity effect ex. increase prices by 19% result in no change in total revenue

inelastic

if the price effect is larger than the quantity effect ex. increase prices by 49% results in total revenue increasing by 22%

elastic

if the quantity effect is larger than the price effect ex. increase prices by 51% results in total revenue deceasing by 69%

inverse, negative

in a market economy, there is an _________ or _________ relationship between the price of a good and the amount of a good that buyers are willing and able to purchase

the income effect

increases in quantity demanded that are attributable to changes in purchasing power as the price of a good falls

the total effect

increases in quantity demanded that are attributable to the combination of the income effect and the substitution effect

the substitution effect

increases in quantity demanded that are attributable to the good becoming cheaper relative to other goods

wealth

is income of wealth more unequally distributed in the United States?

corporation

it is argued that this form of business contributes the most to increases in the nations output (GPD)

nonrivalrous and nonexcludable

item that is impossible to prevent someone from consuming ex. the air we breathe

corporation

limited liability encourages investors to invest large amounts of money into this form of business

stock variable

measured at one specific time, and represents a quantity existing at that point in time (ex. October 4, 2016)

flow variable

measured over an interval of time (per unit of time)

Sole Proprietorship

most American businesses are this form of business

total revenue

price per unit x the number of units sold

the maximin principle

principle to ensure that the people who are least well off in society have as great a share of the goods necessary for well-being as possible

productive efficiency

producing goods and services at the lowest possible cost -on the PPC, it is impossible to produce more of one good without producing less of another

income elasticity of demand

refers to the sensitivity of the quantity demanded for a certain good to a change in real income of the consumers who buy this good

corporations

shareholders are owners of this form of business

macroeconomics

studies the behavior of a country and how its policies affect the economy as a whole. Analyzes entires industries and economies, rather than individual or specific companies

normative economics

subjective statement of opinion rather than a fact that can be tested by looking at the available evidence ex. pollution is the most serious economic problem

0, 1

suppose a family's income is exactly the same as the poverty threshold: This families income deficit would be __ and their ratio of income to poverty would be __

comparative advantage

the ability to produce a good or service at a lower opportunity cost than another

inelastic

the absolute value of price elasticity of demand between 1 and 0 is

elastic

the absolute value of price elasticity of demand greater than 1 is

marginal utility

the additional utility a consumer derives from an additional unit of a good -usually decreases as consumption increases

marginal product

the change in total output divided by the change in the number of workers

specialization

the development of skills in a specific kind of work

planned economy activities

the government makes all production/consumption decisions

producer surplus

the market price - the minimum price a seller is willing to accept

supply

the max amount of a product that sellers are willing and able to provide for sale over a relevant range of prices, holding all other factors constant

consumer surplus

the maximum price a buyer is willing to pay - the market price

poverty threshold

the minimum level of income deemed adequate in a particular country to meet basic needs of a family

demand

the quantity of a good or service that consumers are willing and able to purchase at different possible prices

price elasticity of demand

the ratio of the percent change in the quantity demanded to the percent change in the price as we move along the demand curve

land

the resource category _______ refers to all natural resources, including fertile land, forests, mineral deposits, solar and wind energy, and water

labor

the resource category ________ refers to the mental and physical productivity of workers

entrepreneurial ability

the resource category _____________ refers to business skills such as management of resources, the drive to innovate, and the willingness to bear risk

microeconomics

the study of decision made by people and businesses regarding the allocation of resources and prices of goods and services. Also takes into account taxes and regulations created by governments -supply, demand, equilibrium -production theory -cost of production -labor economics

total utility

the total amount of satisfaction that a customer gets from consumption of a good or service -usually increases as consumption increases

average product

total output divided by the number of workers

there has been economic growth in our society

what explains why do modern American's enjoy a higher standard of living than American's 100 years ago?

opportunity cost

whatever must be given up to obtain some item

excess supply

when quantity supplied is greater than quantity demanded only occurs when the price is greater than the equilibrium price

the law of supply

when the market price of a good increases, the amount that sellers are willing to offer for sale increases

corporations

which business organization gives owners limited liability?

partnership

which business organization has unlimited liability and more than one owner?

Sole Proprietorship

which business organization typically has a single owner that has unlimited liability?

less elastic

with fewer substitutes, demand tends to be


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