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Econ 203 Midterm definitions Buckner | ECON 203 - Economic Principles, Quizzes of Economics

Class: ECON 203 - Economic Principles; Subject: Economics; University: Baton Rouge Community College; Term: Spring 2015;

Typology: Quizzes

2014/2015

Uploaded on 07/07/2015

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TERM 1
Economics
DEFINITION 1
the study of choices we make among our many wants and
desires given our limited resourcesS
TERM 2
Scarcity
DEFINITION 2
exists when human wants (material and nonmaterial) exceed
available resources
TERM 3
4 types of resources
DEFINITION 3
land, labor, capital and entrepreneurs
TERM 4
land
DEFINITION 4
natural resources used in the production of goods and
services
TERM 5
labor
DEFINITION 5
physical and human effort used in the production of goods
and services
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Economics

the study of choices we make among our many wants and desires given our limited resourcesS TERM 2

Scarcity

DEFINITION 2 exists when human wants (material and nonmaterial) exceed available resources TERM 3

4 types of resources

DEFINITION 3 land, labor, capital and entrepreneurs TERM 4

land

DEFINITION 4 natural resources used in the production of goods and services TERM 5

labor

DEFINITION 5 physical and human effort used in the production of goods and services

capital

equipment and structures used to produce goods and services TERM 7

entrepreneurs

DEFINITION 7 take risks; tough and risky decision; new ways to improve production techniques or to create new products; lured bu the chance of MAKING A PROFIT TERM 8

Trade offs

DEFINITION 8 how much an economy can produce efficiently; how that output is distributed- opportunity costs TERM 9

Rational behavior

DEFINITION 9 people do the best they can, based on their values and information, under current and anticipated future circumstances TERM 10

Households

DEFINITION 10 buy goods and servicessells inputs

efficiency

use resources to the fullest extent, wasting no scarce resources; a point along the PPC! more of one good or service requires the sacrifice of another; NOT which point along the PPC is the best. TERM 17

opportunities cost of producing additional

units of a good

DEFINITION 17 rises as a society produces more of that good; bowed outward PPC; cause is resources tend to be specialized; some resources and skills cant be easily adapted from their current used to alternative uses TERM 18

economic growth

DEFINITION 18 outward shift of the PPC; only with qualitative or quantitative changes in the factors of production; advancement in technilogy, improvements in labor productivity, and new sources of natural resources TERM 19

What to produce?

DEFINITION 19 consumers, firms,and gov'ts: choices about what good and services will be produced; each choice has opportunity costCONSUMER SOVEREIGHTY- vote with their dollars in a market economy TERM 20

How to produce?

DEFINITION 20 trade-off between labor and capital; best method is the least cost method; either be labor or capital intensice

for whom is it produced?

distribution mechanism- depends on income! TERM 22

Command economy

DEFINITION 22 gov't uses central planning to coordinate most economic activities TERM 23

mixed economy

DEFINITION 23 gov't and private sectors determine the allocation of resources TERM 24

market economy

DEFINITION 24 allocated good and services through the private decisions of consumers, input, suppliers, and firmsCAPITALISM--> PRIVATE TERM 25

law of demand

DEFINITION 25 quantity of a good or service demanded varies with its price, ceteris paribuswhen the price FALLS, quantity demanded INCREASESShape is like a line horizontal line decreasing

change in quantity demanded

change in a goods own priced leads to a change in quantity supplied TERM 32

causes of change in supply

DEFINITION 32

  1. input prices higher prices--> production costs increase; curve shifts leftLower prices: production cost decrease, curve shifts right2. prices of related goods- substitutes, both goods can be produced using same resources; compliments- when one goes up, so does another3. expectations: expected higher future price-supply less now4. # of suppliers- rightward shift, increase in # of suppliers leads to increase in supply5. technology- can lower the firms cost of production through productivity advances6. gov't: new regulations- decrease the supplyderegulation- shift supply curve to the RIGHTTaxes- shift to leftsubsidies- shift to right7. weather- agricultural products and transportation TERM 33

market equilibrium`

DEFINITION 33 point at which MKT supply and MKT demand curves intersect TERM 34

surplus

DEFINITION 34 quantity supplied exceeds demand TERM 35

shortant

DEFINITION 35 quantity demand exceeds supply

Price elasticity of demand

responsiveness of quantity demanded to change in price% change in quantity / percent change in price TERM 37

inelastic demand

DEFINITION 37 a huge change in price results only in a small change in quantity demanded; price elasticity > 1 TERM 38

elastic demand

DEFINITION 38 quantity demanded is responsive to even a small change in price; price elasticity < 1 TERM 39

determinants of the price elasticity

DEFINITION 39

  1. availability of close substitutes- goods with close substitutes have more elastic demands; goods that are necessities have lower elasticities than luxurious goods; broadly defined goods are less elastic than narrowly defined goods2) proportion of income spent on a good: the smaller the proportion, the lower the elasticity3) amount of time that has elapsed since the price change- the more time people have to adapt to price change, the GREATER the elasticity TERM 40

total revenue

DEFINITION 40 maximized when price and quantity set where price elasticity of demand equals one

accounting profit

total revenues minus total explicit costs TERM 47

profit maximization rule

DEFINITION 47 profits are maximized when marginal revenue is equal to marginal costs TERM 48

perfectly competitive market

DEFINITION 48 many buyers and sellersidentical productseasy market entry and exitno significant barriers to entry TERM 49

price takers

DEFINITION 49 market equilibrium creates flat demand curve for individual firm; they must take the price given by MKT; their influence on price is INSIGNIFICANT TERM 50

Monopoly market

DEFINITION 50 the single supplier of a product that has no close substitute legal barriers, economies of scale, and control over a necessary factor of production

how monopolist maintain monopoly markets

maximize profits at that output where MR equals MC; set price according to demand at the profit maximizing output TERM 52

monopolistic

competition

DEFINITION 52 market structure with many firms selling differentiated products* product differentiation- slightly different products* Many sellers; free entry: economic profits tend to be eliminated in the long run**DOWNWARD sloping of demand curve TERM 53

causes of product differentiation

DEFINITION 53 physical differentprestige (name brand)locationservice TERM 54

oligopoly

DEFINITION 54 market structure in which relttively few firms control all or most of the production and sale of the product TERM 55

characteristics of

oligopoly

DEFINITION 55 products may be homogeneous or differentiated; barriers to entry are often high and economies of scale high; making unprofitable; mutual interdependence- when a firm shapes its policy with an eye to the policies of competing firms

prisoner's dillemma

confess, both will be worse off than if each had remained silentconflict between group and individual rationality; cooperation is difficult TERM 62

COST TABLE!!!

DEFINITION 62 TC= TFC+TVCATC= TC/QAFC=TFC/QAVC=TVC/QTVC=TV- TFCMC= SUBTRACTING THE TC COLUMNPROFIT=TR- TCTR=PxQ