Micro midterm

The study of individual choice under scarcity and its implications for the behavior of prices and quantities in individual markets.

The study of the performance of national economies, and of the policies that governments use to try to improve that performance.

anything that can be used to produce something else.

situation when there is not enough of the resource available to satisfy all the various ways a society wants to use it.

what you must give up in order to get something

comparison of the costs and the benefits of doing something.

decision made at the margin of an activity about whether to do a bit more or a bit less of that activity

the study of marginal decisions.

anything that offers rewards to people who change their behavior

the benefit of taking any action minus its cost

high tariffs on imported grain that protected British landowners.

situation in which each person/countries specializes in the task that he or she is good at performing

resources used to produce goods and services

the technical means for producing goods and services

natural resources, such as mineral deposits, oil, natural gas, water, and actual land acreage

the mental and physical abilities of the workforce

manufactured items used to produce other goods and services

the educational achievements and skills of the labor force (which increase labor productivity)

an economic situation in which no individual would be better off doing something different

taking all opportunities to make some people better off without making other people worse off

a condition in which everyone gets his or her “fair share.”

many buyers and sellers of the same good or service, none of whom can influence the price

model of how a competitive market behaves

shows the quantity demanded at various prices

represents the behavior of buyers.

the quantity that buyers are willing (and able) to purchase at a particular price.

a higher price for a good or service leads people to demand a smaller quantity

a decrease in Pa leads to a decrease in demand of b

a decrease in Pa that leads to an increase in demand of product b

an increase in income leads to an increase in demand

an increase in income leads to a decrease in demand

shows the quantity supplied at various prices

the quantity that producers are willing and able to sell at a particular price.

equilibrium

when the quantity supplied exceeds the quantity demanded.

The quantity demanded exceeds the quantity supplied. It occur when the price is below its equilibrium level.

when an increase in price reduces the quantity demanded a lot (and vice versa).

when an increase in price reduces the quantity demanded just a little

the percentage change in quantity demanded divided by the percentage change in price.

the demand curve is inelastic

the demand curve is elastic

the demand curve is unit elastic.

price elasticity of supply = 0

price elasticity of supply = ∞

if a rise in price increases the quantity supplied a lot

if a rise in price increases the quantity supplied just a little

the difference between market price and what consumers (as individuals or the market) would be willing to pay

the maximum price at which he or she would buy that good

the difference between market price and the price at which firms are willing to supply the product.

Opportunities are missed. Some people could be made better off without making other people worse off.

legal restrictions on how high or low a market price may go.

a maximum price sellers are allowed to charge for a good or service (usually set BELOW equilibrium).

a minimum price buyers are required to pay for a good or service (usually set ABOVE equilibrium).

the loss in total surplus that occurs whenever an action or a policy reduces the quantity transacted below the efficient market equilibrium quantity.

an upper limit, set by the government, on the quantity of some good that can be bought or sold; also referred to as a quantity control

the total amount of a good under a quota or quantity control that can be legally transacted

the right, conferred by the government, to supply a good.

Those who benefit from public spending should bear the burden of the tax that pays for that spending.

if the supplier of that good can not prevent people who do not pay from consuming it. People who don’t pay cannot be easily prevented from using a good.

situation where the supplier of a good can prevent people who do not pay from consuming it. In other words, People who don’t pay can be easily prevented from using a good.

More than one person can consume the same unit of the good at the same time

The same unit of the good cannot be consumed by more than one person at a time (or at all)

excludable and rival in consumption

non excludable and non rival in consumption

are excludable but non rival in consumption

goods that are non excludable but rival in consumption

Many individuals are unwilling to pay for their own consumption and instead will take a free ride on anyone who does pay.

the impact on third parties of a transaction between others

free-market equilibrium that is not providing the socially optimal amount of a good

the total cost society pays for the production of another unit or for taking further action in the economy.

the satisfaction experienced by consumers of a specific good plus or minus the overall environmental and social costs or benefits

The amount of production that optimizes society's overall benefit

all of the costs to individuals of making a deal

a payment designed to encourage activities that yield external benefits

Pigouvian subsidy

a benefit received by people other than the consumers or producers trading in the market

value or satisfaction from consumption

the change in utility from consuming an additional unit.

Each additional unit of a good adds less to utility than the previous unit

all of the consumption bundles that a consumer can afford given his or her income and the prices.

the change in the quantity consumed of that good as the consumer substitutes the good that has become relatively cheaper for the good that has become relatively more expensive.

The change in the quantity consumed of a good that results from a change in the consumer’s purchasing power due to the change in the price of the good.

Decrease in income causes consumers’ purchasing power to drop and reduces consumption (and vice versa).

Decrease in income causes consumers’ purchasing power to drop and increases consumption (and vice versa).