Econ Ch. 1-3 Word Scramble
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| Question | Answer |
| Economics | The study of how people make choices under scarcity and the results of these choices to society |
| Scarcity Principle | People have unlimited wants and limited resources |
| Economic Surplus | ES = benefit - cost |
| Opportunity Cost | The value of what must be foregone in order to undertake an activity |
| Sunk Costs | Costs that cannot be recovered |
| Marginal Cost | Increase in total cost from one addition unit of an activity |
| Average Cost | (Total cost) / (number of units) |
| Marginal Benefit | Increase in total benefit from one additional unit of an activity |
| Average Benefit | (Total benefit) / (number of units) |
| What is the incentive principle? | Incentives are central to people's choices |
| Microeconomics | Studies choice and its implications for price and quantity in individual markets |
| Macroeconomics | Studies the performance of national economies and the policies that governments use to try to improve that performance |
| Cost-Benefit Principle | An individual/firm/society should take an extra action if the extra benefits from taking the action are at least as great as the extra costs |
| Rational Person | Someone with well-defined goals who tries to fulfill those goals as best they can |
| What is the key to using the Cost-Benefit Principle correctly? | Recognizing what taking an action prevents us from doing |
| Marginal Costs and Benefits | Measures that correspond to the increment of activity under consideration |
| Absolute Advantage | When a person can perform a task quicker than another person |
| Comparative Advantage | When a person can perform a task with a lower opportunity cost than another person |
| Principle of Comparative Advantage | Everyone does best when each person/country concentrates on the activities for which their opportunity cost is the lowest |
| Production Possibilities Curve (PPC/PPF) | Illustrates the combinations of two goods that can be produced with given resources |
| Outsourcing | Service work performed overseas by low wage workers |
| Principle of Increasing Opportunity Cost (Low-Hanging Fruit Principle) | In expanding the production of any good, first employ those resources with the lowest opportunity cost and then turn to resources with higher opportunity costs |
| Demand Curve | Illustrates the quantity buyers would purchase at each possible price |
| Buyer's Reservation Price | The highest price an individual is willing to pay for a good |
| Substitution Effect | Buyers switch to substitutes when price goes up |
| Income Effect | Buyers' overall purchasing power goes down if prices go up |
| Supply Curve | Illustrates the quantity of a good that sellers are willing to offer at each price |
| Seller's Reservation Price | Lowest price the seller would be willing to sell for |
| Equilibrium | When there is no tendency for a system to change |
| Equilibrium Price | The price at which the supply and demand curves intersect |
| Equilibrium Quantity | The quantity at which the supply and demand curves intersect |
| Market Equilibrium | Occurs when all buyers and sellers are satisfied with their respective quantities at the market price |
| Price Ceiling | A maximum allowable price, set by law |
| Price Floor | A minimum allowed price, set by law |
| What does a change in quantity demanded result from? | A change in the price of a good |
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