Produced goods that can be used as inputs for further production, such as factories, machinery, tools, computers and buildings
A Latin term meaning “all other things constant”, or “nothing else changes”. The assumption in economics that nothing else changes in a given situation except for the stated change.
Two goods that are used jointly in consumption.
The difference between the maximum price a buyer is willing and able to pay for a good or service and the price actually paid.
Marginal Analysis (Decisions at the Margin)
Decision making characterized by weighing the additional benefits of a change against the additional costs of a change with respect to current conditions.
The willingness and ability of buyers to purchase different quantities of a good at different prices during a specific time period.
The numerical tabulation of the quantity demanded of a good at different prices.
A state of either surplus of shortage in a market.
The way in which society decides to answer key economic questions- in particular those questions that relate to production and trade.
The science of scarcity; the science of how individuals and societies make choices because of scarcity.
The particular talent that some people have for organizing the resources of land, labor and capitol to produce goods, seek new business opportunities, and develop new ways of doing things.
The price-quantity combination from which there is no tendency for buyers or sellers to move away.
Equilibrium Price (Market Clearing Price)
The price at which quantity demanded of the good equals quantity shipped.
The quantity at which the amount of the good that buyers are willing and able to buy equals the amount that sellers are willing and able to sell, and both equal the amount actually bought and sold.
The physical and mental talents people contribute to the production process.
All natural resources, such as minerals, forests, water, and unimproved land.
Law of Demand
As the price of a good rises, the quantity demanded of the good falls, and as the price of a good falls, the quantity demanded of the good rises, Ceteris Paribus.
Law of Diminishing Marginal Utility
For a given time period, the marginal utility or satisfation gained by consuming equal successive units of a good will decline as the amount consumed increases, Ceteris Paribus.
Law of Increasing Opportunity Costs
As more of a good is produced, the opportunity costs of producing that good increases, Ceteris Paribus.
Law of Supply
As the price of a good rises, the quantity supplied of the good rises, and as the price of a good falls, the quantity supplied of the good falls, Ceteris Paribus.
The branch of economics that deals with human behavior and choices as they relate to highly aggregate markets or the entire economy.
The branch of economics that deals with human behavior and choices as they relate to relatively small units – an individual, a firm, an industry, a single market.
The study of “what should be” in economic matters.
The most highly valued opportunity or alternative forfeited when a choice is made.
The study of “what is” in economic matters.
A government-mandated maximum price above which legal trades cannot be made.
A government-mandated minimum price below which legal trades cannot be made.
The difference between the price sellers receive for a good and the minimum or lowest price for which they would have sold the good.
Production Possibilities Frontier (PPF)
Represents the possible combinations of the two goods that can be produced in a certain period of time, under the conditions of a given state of technology and fully employed resources.
The situation that exists when a firm produces its output at the lowest possible per unit cost.
The condition in which our wants are greater than the limited resources available to satisfy those wants.
A condition in which quantity demanded is greater than quantity supplied. Shortages occur only at prices below equilibrium price.
Two goods that satisfy similar needs or desires.
The willingness and ability of sellers to produce and offer to sell different quantities of a good at different prices during a specific time period.
The numerical tabulation of the quantity supplied of a good at different prices. A supply schedule is the numerical representation of the law of supply.
A condition in which quantity supplied is greater than quantity demanded. Surpluses occur only at prices above equilibrium price.
The situation where a country can produce a good at lower opportunity cost than another country can.
The ability of a party (an individual, or firm, or country) to produce a greater quantity of a good, product, or service than competitors, using the same amount of resources.
Anything that can be used to produce something else.
All options given up in order to have the the option chosen.
the use of resources in such a way as to maximize the output of goods and services.
The technical means for producing goods and services.
Providing good(s), service(s) or money to others and receiving good(s), service(s) or money in return.
Gains from Trade
Getting more of what is wanted/needed through trade than what could be gained if a country tried to be self-sufficient.
A situation in which each person engages in a task that he or she is good at performing.
The amount of a good or service that consumers are willing and able to purchase at a specific price.
A graphical representation of the demand schedule. It shows the inverse relationship between quantity demanded and price.
Change in Demand
A shift of the demand curve, caused by an “outside the market” shift, which changes the quantity demanded at any/all given prices.
A Movement along the Demand Curve
A change in the quantity demanded of a good that is the result of a change in that good’s price.
A good for which, other things equal, an increase in income leads to an increase in demand & a decrease in income leads to a decrease in demand.
A good for which, other things equal, an increase in income leads to a decrease in demand & a decrease in income leads to an increase in demand.
The actual amount of a good or service producers are willing to sell at a specific price.
Shows the positive relationship between quantity supplied and price.
Change in Supply
A shift of the supply curve, caused by an “outside the market” shift, which changes the quantity supplied at any/all given prices.
A Movement along the Supply Curve
A change in the quantity supplied of a good that is the result of a change in that good’s price.
Legal restrictions on how high or low a market price may go.
The amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
Production Possibilities Curve
An economic model of a simplified economy (an economy producing only 2 goods) to show trade-offs graphically.
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 is sold.
Supply and Demand Model
A model of how a competitive market works. A way of showing the behaviors and interactions of buyers and sellers.