Economics Terms Word Scramble
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| Term | Definition |
| scarcity | Refers to the limited nature of society's resources, given society's unlimited wants and needs. |
| economics | The study of how people allocate their limited resources to satisfy their nearly unlimited wants. |
| microeconomics | The study of individual units that make up the economy. |
| macroeconomics | The study of the overall aspects and workings of an economy. |
| incentives | Factors that motivate a person to act or exert effort. |
| opportunity cost | The highest-valued alternative that must be sacrificed in order to get something else. |
| economic thinking | requires a purposeful evaluation of the available opportunities to make. Also can mean the process of systematically evaluating a course of action. |
| marginal thinking | requires decision-makers to evaluate whether the benefit of one more unit of something is greater than its cost. |
| markets | bring buyers and sellers together to exchange goods and services. |
| trade | The voluntary exchange of goods and services between two or more parties. |
| comparative advantage | refers to the situation where an individual, business, or country can produce at a lower opportunity cost than a competitor |
| double coincidence of wants | Occurs when each party in an exchange transaction has what the other party desires. |
| economic models | simplifications of reality that allow us to understand the situation at hand. |
| economic theory | seeks to provide understanding of the causes of a phenomenon. (like a diagnosis, provided before a solution or cure is proposed) |
| economic policy | seeks to implement solutions of problematic phenomenon. (The cure to a problem) |
| circular flow | Shows how resources and final goods and services flow through the economy. |
| barter | Involves individuals trading a good they already have or providing a service in exchange for something they want |
| Richard Thaler | Econ Nobel Prize Winner 2017 |
| Adam Smith | Founding Father of Economics |
| David Ricardo | Promoted idea of comparative advantage in as a basis for trade, as opposed to absolute advantage. |
| Positive Statement | Can be tested and validated; it describes "what is." |
| Normative statement | Is an opinion that cannot be tested or validated; it describes "what ought to be." |
| ceteris paribus | Process where economists examine one variable while holding everything else constant. |
| endogenous factors | Variables that can be controlled for in a model. |
| exogenous factors | Variables that cannot be controlled for in a model. |
| production possibilities frontier | illustrates the combinations of outputs that a society can produce if all of its resources are being used effectively. |
| law of increasing opportunity cost | The opportunity cost of producing a good rises as a society produces more of it. |
| specialization | The limiting of one's work to a particular area. |
| absolute advantage | Refers to the ability of one producer to make more than another producer with the same quantity of resources. |
| short run | Period in which we make decisions that reflect our immediate or short-term wants, needs, or limitations. In the short run, consumers can partially adjust their behavior. |
| long run | The decisions we make that reflect our needs, wants, and limitations over a long time horizon. In the long run, consumers have time to fully adjust to market conditions. |
| consumer goods | Produced for present consumption. |
| capital goods | Help produce other valuable goods and services in the future. |
| investment | The process of using resources to create or buy new capital. |
| The Wealth of Nations | Adam Smith, founding father of economics, wrote it. |
| Market economy | Resources are allocated among households and firms with little or no government interference. |
| Invisible hand | A phrase coined by Adam Smith to refer to the unobservable market forces that guide resources to their highest - valued use. |
| Competitive Market | Exists when there are so many buyers and sellers that each has only a small (negligible) impact on the market price and output |
| Imperfect Market | Where either the buyer or seller can influence the market price |
| Market Power | A firm's ability to influence the price of a good or service by exercising control over its demand, supply, or both. |
| Monopoly | Exists when a single company supplies the entire market for a particular good or service. |
| Quantity Demanded | The amount of a good or service that buyers are willing and able to purchase at the current price. |
| Law of Demand | States that, all other things being equal, quantity demanded falls when the price rises, and rises when the price falls. |
| Demand Schedule | Table that shows relationship between the price of a good and the quantity demanded. |
| Demand Curve | Graph of the relationship between the prices in the demand schedule and the quantity demanded at those prices. |
| Market Demand | The sum of all the individual quantities demanded by each buyer in the market at each price. |
| Purchasing Power | The value of your income expressed in terms of how much you can afford. |
| Normal Goods | Consumers buy more of these as income rises, holding all other factors constant. |
| Inferior Good | Purchased out of necessity rather than choice. |
| Complements | Two goods that are used together. When the price of a complementary good increases, the demand for the related good also goes down. |
| Substitutes | Two goods that are used in place of each other. When the price of a substitute good rises, the quantity demanded of that good falls and the demand for the related good goes up. |
| Quantity Supplied | Amount of a good or service that producers are willing and able to sell at the current price. |
| Law of Supply | States that, all other things being equal, the quantity supplied of a good rises when the price of the good rises, and falls when the price of the good falls. |
| Supply Schedule | Table that shows relationship between the price of a good and the quantity supplied. |
| Supply Curve | Graph of the relationship between the prices in the supply schedule and the quantity supplied at those prices. |
| Market Supply | The sum of the quantity supplied by each seller in the market at each price. |
| Inputs | Resources used in the production process |
| Subsidy | A payment made by the government to encourage the consumption or production of a good or service. |
| Equilibrium | The point where the supply curve and the demand curve intersect. |
| Equilibrium Price | The price at which the quantity supplied is equal to the quantity demanded. It is also known as the market - clearing price. |
| Equilibrium Quantity | The amount at which the quantity supplied is equal to the quantity demanded. |
| Law of Supply and Demand | States that the market price of any good will adjust to bring the quantity supplied and the quantity demanded into balance. |
| Shortage | Occurs when the quantity supplied is less than the quantity demanded. A shortage is also called excess demand. |
| Surplus | Occurs when the quantity supplied is greater than the quantity demanded. A surplus is also called excess supply |
| Price controls | Attempt to set prices through government involvement in the market. |
| Price ceiling | A legally established maximum price for a good or service. If binding, can create a shortage |
| Black Markets | Illegal markets that arise when price controls are in place. |
| Rent Control | A price ceiling that applies to the market for apartment rentals |
| Price Gouging Laws | Place a temporary ceiling on the prices that sellers can charge during times of emergency. |
| Price Floor | A legally established minimum price for a good or service. If binding, can create a suprlus. |
| Minimum Wage | The lowest hourly wage rate that firms may legally pay their workers. |
| Inflation | An overall increase in prices. |
| Binding price ceilings | Price ceilings that are set BELOW the equilibrium price. |
| Nonbinding price ceilings | Price ceilings that are set ABOVE the equilibrium price. |
| Binding price floors | Price floors that are set ABOVE the equilibrium price. |
| Nonbinding price floors | Price floors that are set BELOW the equilibrium price. |
| Elasticity | Refers the degree to which individuals, consumers or producers change their demand or the amount supplied in response to price or income changes. |
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