UMD ECON 200 EXAM 1 – Flashcards
Unlock all answers in this set
Unlock answersquestion
economics
answer
study of how people, individually and collectively, manage resources
question
microeconomics
answer
study of how individuals and firms manage resources
question
macroeconomics
answer
study of the economy on a regional, national or international scale
question
rational behavior
answer
making choices to achieve goals in the most effective way possible
question
scarcity
answer
condition of wanting more than we can get with available resources
question
opportunity cost
answer
value of what you have to give up in order to get something, the value of your next best alternative
question
marginal decision making
answer
comparison of additional benefits of a choice against the additional costs it would bring and without considering related benefits costs of past choices
question
sunk cost
answer
costs that have already been incurred and cannot be recovered or refunded
question
incentive
answer
something that causes people to behave in a certain way by changing the trade-offs they face
question
efficiency
answer
use of resources in the most productive way possible to produce the goods and services that have the greatest total economic value to society
question
correlation
answer
consistently observed relationship between events and variables
question
model
answer
simplified representation of the important parts of a complicated situation
question
circular flow model
answer
simplified representation of how the economy's transactions work together
question
positive statement
answer
factual claim about how the world actually works
question
normative statement
answer
claim about how the world should be
question
market economy
answer
economy in which private individuals, rather than a centralized planning authority, make the decisions
question
market
answer
buyers and sellers who trade a particular good or service
question
competitive market
answer
market in which fully informed, price taking buyers and sellers easily trade a standardized good or service
question
standardized good
answer
good for which any 2 units share the same features and are interchangeable
question
transaction costs
answer
costs incurred by buyer and seller in agreeing to and executing a sale of goods or services
question
price taker
answer
buyer or seller who cannot affect the market price
question
quantity demanded
answer
amount of a particular good that buyers will purchase at a given price during a specified period
question
law of demanded
answer
fundamental characteristic of demand states, all else equal, quantity demand rises as price falls
question
demand schedule
answer
table shows the quantities of a particular good or service at various prices
question
demand curve
answer
graph shows the quantities of a good or service that consumers will demand at various prices
question
substitutes
answer
goods that serve a similar enough purpose that a consumer might purchase one in place of the other
question
complements
answer
goods that are consumed together, so that purchasing one will make consumers more likely to purchase others
question
normal goods
answer
goods for which demand increases as income increases
question
inferior goods
answer
goods for which demand decreases as income increases
question
quantity supplied
answer
amount of a good or service that producers will offer for sale at a given price during a specified period
question
law of supply
answer
fundamental characteristic of supply states, all else equal, quantity supplied rises as prices rises
question
supply schedule
answer
table shows the quantities of a good or service producers will supply at various prices
question
supply curve
answer
graph shows the quantities of a good or service that producers will supply at various prices
question
equilibrium
answer
situation in a market when the quantity supplied equals the quantity demanded, graphically where the demand curve interests the supply curve
question
equilibrium price
answer
price at which the quantity supplied equals the quantity demanded
question
equilibrium quantity
answer
quantity that is supplied and demanded at the equilibrium price
question
surplus
answer
excess supply and the situation the quantity of a good that is supplied is higher than the quantity demanded
question
shortage
answer
excess demand and the situation the quantity of a good demanded is higher than the quantity supplied
question
elasticity
answer
measure of how much consumers and producers will respond to a change in market conditions
question
price elasticity of demand
answer
size of he change in the quantity demanded of a good or service when its price changes
question
perfect elastic demand
answer
demand for which the demand curve is horizontal and when the demand could be any quantity at the given price but drops to 0 if the price increases
question
perfect inelastic demand
answer
demand for which the demand curve is vertical, and quantity demanded is always the same no matter the price
question
elastic
answer
demand that has absolute value of elasticity greater than 1
question
inelastic
answer
demand that has an absolute value of elasticity less than 1
question
unity-elastic
answer
demand that has an absolute value of elasticity exactly 1
question
total revenue
answer
amount a firm receives from the sale of goods, quantity sold multiplied by the price paid for each unit
question
price elasticity of supply
answer
size of change in the quantity supplied of a good or service when its price changes
question
cross-price elasticity of demand
answer
measure of how the quantity demanded of one good changes when the price of a different good changes
question
income elastic of demand
answer
measure of how much quantity demanded changes in response to change in consumers income
question
willingness to pay (reservation price)
answer
maximum price that a buyer would be willing to pay for a good or service
question
willingness to sell
answer
minimum price that a seller is willing to accept in exchange for a good or service
question
consumer surplus
answer
net benefit that a producer receives from the sale of a good or service, measures by the difference between the consumers willingness to pay and the actual price
question
producer surplus
answer
net benefit that a producer receives from the sale of a good or service, measured by the difference between the producer's willingness to sell and the actual price
question
total surplus
answer
measure of the combined benefits that everyone recipes rom participating in an exchange of goods or services
question
zero-sum game
answer
situation in which whenever one person game, another loses an equal amount, such that the net value of any transaction is zero
question
efficient market
answer
an arrangement such that no exchange can make anyone better off without someone becoming worse off
question
deadweight loss
answer
loss of total surplus that occur because the quantity of a good that is bought and sold is below the market equilibrium quantity
question
market failures
answer
situation in which the assumption of efficient, competitive markets fails to hold
question
price control
answer
regulation that sets a maximum or good can be sold
question
price floor
answer
minimum lega price at which a good can be sold
question
tax wedges
answer
difference between the price paid by buyers and the price received by sellers in the presence of tax
question
tax incidence
answer
relative tax burden borne by buyers and sellers
question
subsidy
answer
requirement that the government pay an extra amount to producers or consumers of a good
question
private costs
answer
costs that fall directly on the economic decision maker
question
external cost
answer
cost imposed without compensation on someone other than the person who caused them
question
social cost
answer
entire cost of a decision - both private and eternal costs
question
private benefits
answer
benefits that accuse directly to the decision maker
question
external benefit
answer
benefit that accuse without compensation to someone other than the person who caused it
question
social benefit
answer
entire benefits of a decision - both private and external benefits
question
network externality
answer
effect on additional user of a good has on the value of that good
question
production externality
answer
externality that occurs when a good s being produced
question
consumption externality
answer
externality that occurs when a good is being consumed
question
coase theorem
answer
idea that even in the presence of an externality, individuals can reach an efficient equilibrium through private trades, assuming 0 transaction cost
question
pigovian tax
answer
tax meant to counter balance a negative externality
question
traceable allowance
answer
production or consumption quota that can be bought or sold
