Economics – Paul Krugman | Robin Wells – Flashcards
Unlock all answers in this set
Unlock answersquestion
An economy is a system for coordinating society's productive activities.
answer
Economy (Intro)
question
Economics is the social science that studies the production, distribution, and consumption of goods and services.
answer
Economics (Intro)
question
A market economy is an economy is which decisions about production and consumption are made by individual producers and consumers.
answer
Market Economy (Intro)
question
The invisible hand refers to the way in which the individual pursuit of self-interest can lead to good results for society as a whole.
answer
Invisible Hand (Intro)
question
Microeconomics is the branch of economics that studies how people make decisions and how these decisions interact.
answer
Microeconomics (Intro)
question
When the individual pursuit of self-interest leads to bad results for society as a whole, there is market failure.
answer
Market Failure (Intro)
question
A recession is a downturn in the economy.
answer
Recession (Intro)
question
Macroeconomics is the branch of economics that is concerned with overall ups and downs in the economy.
answer
Macroeconomics (Intro)
question
Economic growth is the growing ability of the economy to produce goods and services.
answer
Economic Growth (Intro)
question
Individual choice is the decision by an individual of what to do, which necessarily involves a decision of what not to do.
answer
Individual Choice (1)
question
A resource is anything that can be used to product something else.
answer
Resource (1)
question
There is not enough of the resources available to satisfy all the various ways a society wants to use them.
answer
Resources are Scarce (1)
question
The real cost of an item is its opportunity cost: what you must give up in order to get it.
answer
Opportunity Costs (1)
question
You make a trade-off when you compare the costs with the benefits of doing something.
answer
Trade-Off (1)
question
Decisions about whether to do a bit more or a bit less of an activity are marginal decisions. The study of such decisions is known as marginal analysis.
answer
Marginal Decisions (1)
question
The study of marginal decisions.
answer
Marginal Analysis (1)
question
An incentive is anything that offers rewards to people who change their behavior.
answer
Incentives (1)
question
Interaction of choices - my choices affect your choices, and vice versa - is a feature of most economic situations. The results of this interaction are often quite different from what the individual intends.
answer
Interaction (1)
question
In a market economy, individuals engage in trade: they provide goods and services to others and receive goods and services in return.
answer
Trade (1)
question
There are gains from trade: people can get more of what they want through trade than they could if they tried to be self-sufficient. This increase in output is due to specialization.
answer
Gains from Trade (1)
question
Each person specializes in the task that he or she is good at performing.
answer
Specialization (1)
question
An economic situation is in equilibrium when no individual would be better off doing something different.
answer
Equilibrium (1)
question
An economy is efficient if it takes all opportunities to make some people better off without making other people worse off.
answer
Efficient (1)
question
Equity means that everyone gets his or her fail share. Since people can disagree about what's "fair," equity isn't as well defined a concept as efficiency.
answer
Equity (1)
question
A model is a simplified representation of a real situation that is used to better understand real-life situations.
answer
Model (2)
question
The other things equal assumption means that all other relevant factors remain unchanged.
answer
Other Things Equal Assumption (2)
question
The production possibility frontier illustrates the trade-offs facing an economy that produces only two goods. It shows the maximum quantity of one good that can be produced for any given quantity produced of the other.
answer
Production Possibility Frontier (2)
question
Factors of production are resources used to produce goods and services.
answer
Factors of Production (2)
question
Technology is the technical means for producing goods and services.
answer
Technology (2)
question
An individual has a comparative advantage in producing a good or service if the opportunity cost of producing the good or service is lower for that individual than for other people.
answer
Comparative Advantage (2)
question
An individual has an absolute advantage in an activity if he or she can do it better than other people. Having an absolute advantage is not the same thing as having a comparative advantage.
answer
Absolute Advantage (2)
question
Trade takes the form of barter when people directly exchange goods or services that they have for goods or services that they want.
answer
Barter (2)
question
The circular-flow diagram represents the transactions in an economy by flows around a circle.
answer
Circular-Flow Diagram (2)
question
A household is a person or a group of people that share their income.
answer
Household (2)
question
A firm is an organization that produces goods and services for sale.
answer
Firm (2)
question
Firms sell goods and services that they produce to households in markets for goods and services.
answer
Market for Goods and Services (2)
question
Firms buy the resources they need to produce goods and services in factor markets.
answer
Factor Markets (2)
question
An economy's income distribution is the way in which total income is divided among the owners of the various factors of production.
answer
Income Distribution (2)
question
Positive economics is the branch of economic analysis that describes the way the economy actually works.
answer
Positive Economics (2)
question
Normative economics makes prescriptions about the way the economy should work.
answer
Normative Economics (2)
question
A forecast is a simple prediction of the future.
answer
Forecast (2)
question
The line along which values of the x-variable are measured is called the horizontal axis or x-axis.
answer
Horizontal Axis or X-axis (2)
question
The line along which values of the y-variable are measured is called the vertical axis or y-axis.
answer
Vertical Axis or Y-axis (2)
question
The point where the axes of a two-variable graph meet is the origin.
answer
Origin (2)
question
A causal relationship exists between two variables when the value taken by one variable directly influences or determines the value taken by the other variable. In a causal relationship, the determining variable is called the independent variable; the variable it determines is called the dependent variable.
answer
Causal Relationship (2)
question
A variable (often denoted by x) whose variation does not depend on that of another.
answer
Independent Variable (2)
question
A variable (often denoted by y) whose value depends on that of another.
answer
Dependent Variable (2)
question
A curve is a line on a graph that depicts a relationship between two variables. It may be either a straight line or a curved line.
answer
Curve (2)
question
If the curve is a straight line, the variables have a linear relationship.
answer
Linear Relationship (2)
question
If the curve is not a straight line, the variables have a nonlinear relationship.
answer
Nonlinear Relationship (2)
question
Two variables have a positive relationship when an increase in the value of one variable is associated with an increase in the value of the other variable. It is illustrated by a curve that slopes upward from left to right.
answer
Positive Relationship (2)
question
Two variables have a negative relationship when an increase in the value of one variable is associated with a decrease in the value of the other variable. It is illustrated by a curve that slopes downward from left to right.
answer
Negative Relationship (2)
question
The horizontal intercept of a curve is the point at which it hits the horizontal axis; it indicates the value of the x-variable when the value of the y-variable is zero.
answer
Horizontal Intercept (2)
question
The vertical intercept of a curve is the point at which it hits the vertical axis; it shows the value of the y-variable when the value of the x-variable is zero.
answer
Vertical Intercept (2)
question
The slope of a line or curve is a measure of how steep it is. The slope of a line is measured by "rise over run" - the change in the y-variable between two points on the line divided by the change in the x-variable between those same two points.
answer
Slope (2)
question
A nonlinear curve is one in which the slope is not the same between every pair of points.
answer
Nonlinear Curve (2)
question
The absolute value of a negative number is the value of the negative number without the minus sign.
answer
Absolute Value (2)
question
A tangent line is a straight line that just touches, or is tangent to, a nonlinear curve at a particular point. The slope of the tangent line is equal to the slope of the nonlinear curve at the point.
answer
Tangent Line (2)
question
A nonlinear curve may have a maximum point, the highest point along the curve. At the maximum, the slope of the curve changes from positive to negative.
answer
Maximum (2)
question
A nonlinear curve may have a minimum point, the lowest point along the curve. At the minimum, the slope of the curve changes from negative to positive.
answer
Minimum (2)
question
A time-series graph has dates on the horizontal axis and values of a variable that occurred on those dates on the vertical axis.
answer
Time-Series Graph (2)
question
A scatter diagram shows points that correspond to actual observations of the x- and y-variables. A curve is usually fitted to the scatter of points.
answer
Scatter Diagram (2)
question
A pie chart shows how some total is divided among its components, usually expressed in percentages.
answer
Pie Chart (2)
question
A bar graph uses bars of varying height or length to show the comparative sizes of different observations of a variable.
answer
Bar Graph (2)
question
An axis in truncated when some of the values on the axis are omitted, usually to save space.
answer
Truncated (2)
question
An omitted variable is an unobserved variable that, through its influence on other variables, creates the erroneous appearance on a direct causal relationship among those variables.
answer
Omitted Variable (2)
question
The error of reverse causality is committed when the true direction of causality between two variables is reversed.
answer
Reverse Causality (2)
question
A competitive market is a market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is sold.
answer
Competitive Market (3)
question
The supply and demand model is a model of how a competitive market works.
answer
Supply and Demand (3)
question
A demand schedule shows how much of a good or service consumers will want to buy at different prices.
answer
Demand Schedule (3)
question
The quantity demanded is the actual amount of a good or service consumers are willing to buy at some specific price.
answer
Quantity Demanded (3)
question
A demand curve is a graphical representation of the demand schedule. It shows the relationship between quantity demanded and price.
answer
Demand Curve (3)
question
The law of demand says that a higher price for a good or service, other things being equal, leads people to demand a smaller quantity of that good or service.
answer
Law of Demand (3)
question
A shift of the demand curve is a change in the quantity demanded at any given price, represented by the change of the original demand curve to a new position, denoted by a new demand curve.
answer
Shift of the Demand Curve (3)
question
A movement along the demand curve is a change in the quantity demanded of a good that is the result of a change in that good's price.
answer
Movement Along the Demand Curve (3)
question
Two goods are substitutes if a rise in the price of one of the goods leads to an increase in the demand for the other good.
answer
Substitutes (3)
question
Two goods are complements if a rise in the price of one good leads to a decrease in the demand for the other good.
answer
Complements (3)
question
When a rise in income increases the demand for a good - the normal case - it is a normal good.
answer
Normal Good (3)
question
When a rise in income decreases the demand for a good, it is an inferior good.
answer
Inferior Good (3)
question
An individual demand curve illustrates the relationship between quantity demanded and price for an individual consumer.
answer
Individual Demand Curve (3)
question
The quantity supplied is the actual amount of a good or service producers are willing to sell at some specific price.
answer
Quantity Supplied (3)
question
A supply schedule shows how much of a good or service producers will supply at different prices.
answer
Supply Schedule (3)
question
A supply curve shows the relationship between quantity supplied and price.
answer
Supply Curve (3)
question
A shift of the supply curve is a change in the quantity supplied of a good or service at any given price. It is represented by the change of the original supply curve to a new position, denoted by a new supply curve.
answer
Shift of the Supply Curve (3)
question
A movement along the supply curve is a change in the quantity supplied of a good that is the result of a change in that good's price.
answer
Movement along the supply curve (3)
question
An input is a good or service that is used to produce another good or service.
answer
Input (3)
question
An individual supply curve illustrates the relationship between quantity supplied and price for an individual producer.
answer
Individual Supply Curve (3)
question
A competitive market is in equilibrium when price has moved to a level at which the quantity of a good or service demanded equals the quantity of that good or service supplied. The price at which this takes place is the equilibrium price, also referred to as the market-clearing price. The quantity of a good or service bought and sold at the price is the equilibrium quantity.
answer
Supply, Demand, and Equilibrium (3)
question
There is a surplus of a good or service when the quantity supplied exceeds the quantity demanded. Surpluses occur when the price is above its equilibrium level.
answer
Surplus (3)
question
There is a shortage of a good or service when the quantity demanded exceeds the quantity supplied. Shortages occur when the price is below its equilibrium level.
answer
Shortage (3)
question
A consumer's willingness to pay for a good is the maximum price at which he or she would buy that good.
answer
Willingness to Pay (4)
question
Individual consumer surplus is the net gain to an individual buyer from the purchase of a good. It is equal to the difference between the buyer's willingness to pay and the price paid.
answer
Individual Consumer Surplus (4)
question
Total consumer surplus is the sum of the individual consumer surpluses of all the buyers of a good in a market.
answer
Total Consumer Surplus (4)
question
The term consumer surplus is often used to refer to both individual and to total consumer surplus.
answer
Consumer Surplus (4)
