Key+Terms+explained

chapter 1 key concepts scarcity: the limited nature of the resources that we can use to make goods and services economics: Study of how to manage the limited, or scarce, resources efficiency: How well the society is getting the most it can from the limited resources equity: How fairly the resources are distributed among the society members opportunity cost: What was given up in order to gain something else rational people: People trying to reach their goal with the best effort marginal changes: small adjustments incentive: Catalyst of an action market economy: Economy that distributes its resources by using the decentralized decisions of many different members of its economy property rights: Being able to own and control over resources market failure: situation where the market failed to distribute resources efficiently externality: Impact of one’s actions on a innocent bystander market power: Ability of a single or small group of people to have influence on market price productivity:Quantity of goods and services produced in a hour by a worker inflation: Increase in the overall prices in the economy business cycle: cycle an economy goes through which affects things such as the employment rate and production chapter 3 key concepts absolute advantage: being able produce more outputs than other producers using the same amount of inputs opportunity cost: What was given up in order to gain something else comparative advantage: being able to produce goods and services with lower opportunity costs than other producers can imports: Goods produced abroad that enters the domestic market exports: Goods produced domestically that enters the world market chapter 5 key concepts elasticity: how intense the quantity demanded or quantity supplied respond to its determinants price elasticity of demand: how much the quantity demanded responds to a change in price total revenue: total amount paid by consumers or received by sellers. Calculated by the equation price of good multiplied by quantity sold income elasticity of demand: how the quantity demanded changes as consumer income changes cross-price elasticity of demand: how the quantity demanded of one good changes as the price of another good changes price elasticity of supply: how much the quantity supplied responds to changes in the price chapter 7 key concepts welfare economics: the study of how the allocation of resources affects economic well-being willingness to pay: The maximum amount that a buyer will pay for a good consumer surplus: the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it cost: the value of everything a seller must give up to produce a good producer surplus: the amount a seller is paid for a good minus the seller’s cost of providing it efficiency: the property of a resource allocation of maximizing the total surplus received by all members of society equity: the fairness of the distribution of well-being among the members of society chapter 9 key concepts world price: the price of a good that reached equilibrium, in the world market for that good. tariff: a tax on goods produced abroad and sold domestically chapter 11 key concepts excludability: the property of a good whereby a person can be prevented from using it rivalry in consumption: the property of a good whereby one person’s use diminishes other people’s use private goods: goods that are both excludable and rival in consumption public goods: goods that are neither excludable nor rival in consumption common resources: goods that are rival in consumption but not excludable free rider: a person who receives the benefit of a good but avoids paying for it cost-benefit analysis: a study that compares the costs and benefits to society of providing a public good Tragedy of the Commons: a parable that illustrates why common resources get used more than is desirable from the standpoint of society as a whole chapter 13 key concepts total revenue: The amount that the firm receives for the sale of its output total cost: The amount that the firm pays to buy inputs profit: Firm’s total revenue minus its total cost explicit costs: costs that require the firm to pay out some money implicit costs: costs that does not require the firm to make a cash outlay economic profit: total revenue minus total cost, which includes both explicit and implicit costs accounting profit: total revenue minus total explicit cost production function: The relationship between the quantity of inputs and the quantity of outputs marginal product: increase in the quantity of output obtained from one additional unit of that input diminishing marginal product: The property whereby the marginal product of an input declines as the quantity of the input increase fixed costs: costs that do not vary with the quantity of output produced variable costs: costs that do vary with the quantity of output produced average total cost: total cost divided by the quantity of output average fixed cost: fixed costs divided by the quantity of output average variable cost: variable costs divided by the quantity of output marginal cost: the increase in total cost that arises from an extra unit of production efficient scale: The quantity of output that minimizes the average total cost economies of scale: The property whereby long-run average total cost falls as the quantity of output increases. diseconomies of scale: The property whereby long-run average total cost rises as the quantity of output increases constant returns to scale: The property whereby long-run average total cost stays the same as the quantity of output changes Ch 15 key terms: monopoly: a firm that is the sole seller of a product with our close substitutes. natural monopoly: a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms Price discrimination: the business practice of selling same good at different prices to different customers. Ch 17 key terms: monopolistic competition: a market structure in which many firms sell products that are similar but not identical Ch 19 key terms: compensating differential: a difference in wages that arises to offset the non monetary characteristics of different jobs. human capital: the accumulation of investments in people, such as education and on-the-job training. union: a worker association that bargains with employers over wages and working conditions strike: the organized withdrawal of labor from a firm by a union efficiency wages: above-equilibrium wages paid by firms to increase worker productivity. discrimination: the offering of different opportunities to similar individuals who differ only by race, ethnic group, sex, age, or other personal characteristics. CH 20 key terms: poverty rate: the percentage of the population whose family income falls below an absolute level called the poverty line poverty line: an absolute level of income set by the federal government for each family size below which a family is deemed to be in poverty. In-kind transfers: transfers to the poor given in the form of goods and services rather than cash. life cycle: the regular pattern of income variation over a person's life permanent income: a person's normal income utilitarianism: the political philosophy according to which the government should choose policies to maximize the total utility of everyone in society. utility: a measure of happiness or satisfaction liberalism: the political philosophy according to which the government should choose policies deemed to be just, as evaluated by an impartial observer behind a "veil of ignorance" maximin criterion: the claim that the government should aim to maximize the well-being of the worst-off person in society. social insurance: government policy aimed at protecting people at against the risk of adverse events. libertarianism: the political philosophy according to which the government should punish crimes and enforce voluntary agreements but not redistribute income welfare: governments programs that supplement the incomes of the needy negative income tax: a tax system that collects revenue from high income households and gives transfers to low income households.