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.

Factors of Production
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Include the human and natural resource needed to produce any good or service: Land, labor, capital and entrepreneurship

Factors of Production
Market system
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Market economic system: A system of resource allocation in which buyers and sellers meet in markets to determine the price and quantity of goods, services and productive resources.

Market system
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
Free market economy
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An economic system in which resources are allocated purely by the forces of demand, supply and the price mechanism. The government has no influence over what is produced, how it is produced and for whom.

Free market economy
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
Long-run (microeconomics)
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The period of time over which all resources (land, labor and capital) can be added or subtracted to the production of a good. “The variable-plant period”

Long-run (microeconomics)
Price mechanism
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Determines the allocation of resources between society’s competing wants and needs in a free market system. Prices act as signals from buyers to sellers as to what is most demanded by society.

Price mechanism
Wage
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The payment to labor in the resource market. Wages are the “price of labor”

Wage
Rent
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The price of land resources. Rent must be paid by producers, either as an explicit cost or as an opportunity cost for those who own the land resources employed in production.

Rent
Shortage
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When the quantity demanded for a particular good is greater than the quantity supplied. Also called “excess demand”. Occurs when the price is below the equilibrium level, for example, when a government imposes a price ceiling in a market.

Shortage

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