Microeconomics Flashcards

Only 10 flashcards are shown at a time! Once you’ve mastered these 10 Economic terms, click the shuffle button below for 10 new terms. There are approximately 115 flashcards covering Microeconomics.

Positive statement
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A claim which can be proven with facts. For example, “The unemployment rate has risen for two consecutive quarters.”

Positive statement
Quantity
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This is the amount of output produced and consumed in a market determined by the supply and demand. As supply and demand change, the quantity in the market changes as well.

Quantity
Choice
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In economics, decisions must be made between the various alternative uses for society’s scarce resources. Every choice involves an opportunity cost.

Choice
Marginal Social Benefit (MSB)
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The benefits experienced by the individual consumers of a particular good, plus or minus any social or environmental benefits or costs. MSB can be greater than marginal private benefit (MPB) if there are positive externalities of consumption (e.g. education) or less than MPB if there are negative externatlities of consumption (e.g. smoking).

Marginal Social Benefit (MSB)
The Basic Economic Questions
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What should be produced? How should it be produced? and, “For whom should production take place?” Any economic system, either centrally planned or free market, must address these questions.

The Basic Economic Questions
Supply
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A schedule or curve showing the direct relationship between the quantity of output firms produce in a particular period of time and the various prices of the good.

Supply
Investment
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A component of aggregate demand, it includes all spending on capital equipment, inventories, and technology by firms. This does not include financial investment, which is the purchase of financial assets (stocks and bonds), not included in GDP because they are only purely financial investments.

Investment
Disequilibrium
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When the price in a market is either too high or too low, so that the quantities supplied and demanded are not the same. If a price is higher than equilibrium, there will be a surplus in the market, meaning the quantity supplied will be greater than the quantity demanded. If a price is below equilibrium, there will be a shortage, meaning that the quantity demanded will be greater than the quantity supplied.

Disequilibrium
Elastic Demand
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When consumers are relatively responsive to price changes. A PED coefficient of more than one means that a particular change in the price of a good will be met by a proportionally larger change in the quantity demanded.

Elastic Demand
Law of Supply
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Ceteris paribus, there exists a direct relationship between the price of a good and the quantity supplied by producers. Explains why the supply curve slopes upwards. As the price of good rises, sellers wish to supply greater quantities as the possibility for economic profits is greater. At lower prices, less output is produced since it is harder to earn profits. Firms are profit seekers.

Law of Supply

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