Definitions <br />Sections 1 and Section 2<br />
Section 1<br />
Positive Economics<br />Examines matters of economics that can be proven to be right or wrong by looking at facts.<br />No...
Microeconomics<br />Is the study of the individual markets and decisions by individual households and firms<br />Macroecon...
Scarcity<br />Is a term  used for a limited availability of recourses<br />Free market economy<br />When the productions a...
Opportunity cost<br />Is the sacrifice made In the next best alternative.<br />Type of good<br />Free good<br />Involve no...
Factors of Production<br />-Land-natural resources<br />-Labor-human resources<br />-Capital- man maid aids to production-...
Production possibility Curve (PPC)<br />Shows the maximum combination of goods and services which can be produced given th...
Economic development<br />Concept involving improvement in standards of living, reduction in poverty, improved health, and...
Actualoutput<br />The production of goods and services in the economy achieved in a certain period of time<br />Potential ...
Section 2<br />
Market<br />Where consumers and producers come together to establish a price where each are happy with for a good or servi...
Demand<br />Is the willingness and ability to purchase a quantity of a good or service at a certain price over a given tim...
Supply<br />Is the willingness and ability of a producer to produce a quantity of a good or service at a certain price ove...
Equilibrium price<br />Is the market clearing price; demand is equal to supply<br />S<br />EQUAL<br />D<br />
Maximum price<br />Aka ‘ceiling price’ is the set price by the government, in which sellers are not allowed to rise the pr...
Minimum price<br />Aka ‘floor price’ is set by the government, in which the price is not allowed to be bellow a certain pr...
ELASTICIES <br />Price elasticity of demand (PED)<br /> Is the measure of the responsiveness of the quantity demanded of a...
Price Elastic demand<br /> Means that the change in the price of the good or service will cause a larger change in the qua...
Price Inelastic demand<br />Means that a change in the price of the good or service will cause a small change in the quant...
Income Elasticity of demand (YED)<br />Is a measure of the responsiveness of demand for a good to a change in income.<br /...
Cross elasticity of demand (XED)<br />Measure of the responsiveness of the demand for a good or service to a change in the...
THEORY OF THE FIRM<br />Fixed cost<br />Are costs of production that do not change with the level of the output.<br />Eg. ...
Variable costs<br />Are costs of production that vary with the level of  output<br />Eg. Labor, Material<br />Cost<br />F<...
Total cost<br />Are the total costs of producing a certain level of output fixed costs plus the variable cost<br />Average...
Short run<br />Period of time in which at least one factor of production is fixed<br />SPAC1<br />SPAC5<br />SPAC2<br />SP...
The long run<br />Is the period of time in which all factors of production are variable<br />SPAC1<br />SPAC5<br />SPAC2<b...
Law of diminishing average return<br />As extra units of a variable factor are applied to a fixed factor, the output per u...
Law of Constant Return<br />As extra units are added, the increase in outputs will be equal to the increase in costs<br />...
Law of diminishing marginal returns<br />As extra units of a variable factor are applied to a fixed factor, the output fro...
Economies of scale<br />Are any fall in long run unit costs that come about as a result of a firm increasing its scale of ...
Average revenue<br />Is the total revenue received divided by the number of units sold. Usually the price is equal to aver...
Marginal revenue<br />Is the extra revenue gained from selling an additional unit of a good or service<br />Cost<br />A = ...
Normal profits<br />Are the amount of revenue needed to cover the total costs of production, including the opportunity cos...
 Abnormal profits<br />Are any level of profit that is greater than the required to ensure that a firm will continue to su...
Profit maximizing level of output <br />the level of output where marginal revenue is equal to marginal costs.<br />Shut d...
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  • Vocab

    1. 1. Definitions <br />Sections 1 and Section 2<br />
    2. 2. Section 1<br />
    3. 3. Positive Economics<br />Examines matters of economics that can be proven to be right or wrong by looking at facts.<br />Normative economics <br />Examines matters of economics that are based upon opinion and so are hard to be proven to be right or wrong. <br />
    4. 4. Microeconomics<br />Is the study of the individual markets and decisions by individual households and firms<br />Macroeconomics<br />is the study of the economy as a whole.<br />
    5. 5. Scarcity<br />Is a term used for a limited availability of recourses<br />Free market economy<br />When the productions are privately held by individuals and firms<br />
    6. 6. Opportunity cost<br />Is the sacrifice made In the next best alternative.<br />Type of good<br />Free good<br />Involve no opportunity cost<br />Capital Good<br />Use consumption goods in the future<br />Consumption Good<br />bought for final consumption <br />
    7. 7. Factors of Production<br />-Land-natural resources<br />-Labor-human resources<br />-Capital- man maid aids to production-Entrepreneurship- this is the ability to combine<br />
    8. 8. Production possibility Curve (PPC)<br />Shows the maximum combination of goods and services which can be produced given the existing levels of resources.<br />0<br />
    9. 9. Economic development<br />Concept involving improvement in standards of living, reduction in poverty, improved health, and improved education<br />Sustainable development<br />Is the economic development that meets its needs of the present without compromising the ability of the future generation to meet their needs.<br />Economic Growth<br />B<br />A<br />Shift in Production<br />
    10. 10. Actualoutput<br />The production of goods and services in the economy achieved in a certain period of time<br />Potential output<br /> The possible production that would be achieved if the available factors were employed.<br />Actual Growth<br />When unemployed factors of production are brought into use<br />Potentialgrown<br />When the quantity or quality of factors of production within an economy increases<br />Economic Growth<br />growth of real output in an economy <br />
    11. 11. Section 2<br />
    12. 12. Market<br />Where consumers and producers come together to establish a price where each are happy with for a good or service.<br />
    13. 13. Demand<br />Is the willingness and ability to purchase a quantity of a good or service at a certain price over a given time of period<br />Law of demand<br />States as the price of good or service rises, the actual quantity demanded decrease.<br />Demand curve<br />Is a representation of the law of demand.<br />D2<br />D<br />0<br />
    14. 14. Supply<br />Is the willingness and ability of a producer to produce a quantity of a good or service at a certain price over a certain period of time<br />Law of supply <br />states that as a price of a good rises, the quantity supplied will increase as well. <br />Supply Curve<br />is the curve of representation between the price and quantity supplied<br />P2<br />Shift in Supply <br />P1<br />S2<br />S1<br />Q1<br />Q2<br />
    15. 15. Equilibrium price<br />Is the market clearing price; demand is equal to supply<br />S<br />EQUAL<br />D<br />
    16. 16. Maximum price<br />Aka ‘ceiling price’ is the set price by the government, in which sellers are not allowed to rise the price above. <br />Price Ceiling on Gasoline<br />Supply<br />Price<br />P1<br />$5.00<br />E1<br />Illegal<br />P3<br />$1.50<br />Legal <br />Shortage<br />Demand<br />Quantity<br />Q1<br />0<br />
    17. 17. Minimum price<br />Aka ‘floor price’ is set by the government, in which the price is not allowed to be bellow a certain price. <br />Buffer stock scheme<br />Sets a maximum and minimum price in the market to stabilize prices.<br />Equilibrium Point<br />S<br />Illegal<br />Minimum price<br />Legal<br />D<br />
    18. 18. ELASTICIES <br />Price elasticity of demand (PED)<br /> Is the measure of the responsiveness of the quantity demanded of a good or service to a change in its price<br />
    19. 19. Price Elastic demand<br /> Means that the change in the price of the good or service will cause a larger change in the quantity demanded<br />PED > 1<br />P2<br />Price<br />5%<br />P1<br />D<br />Q2<br />Q1<br />Quantity<br />10%<br />
    20. 20. Price Inelastic demand<br />Means that a change in the price of the good or service will cause a small change in the quantity demanded.<br />Price<br />PED < 1<br />P2<br />20%<br />P1<br />D<br />Q2<br />Q1<br />Quantity <br />10%<br />
    21. 21. Income Elasticity of demand (YED)<br />Is a measure of the responsiveness of demand for a good to a change in income.<br />A Normal good<br />Has a positive income elasticity of demand. As income rises, demand increases<br />Inferior goods<br />Have a negative income elasticity of demand. As income rises, demand decreases. <br />Price elasticity of supply (PES)<br /> Is a measure of the responsiveness of the quantity supplied of a good or service to a change in its price<br />Indirect tax <br />Is an expenditure tax on a good or service<br />Incidence (burden)<br />tax refers to the amount of tax paid by the producer or the consumer.<br />
    22. 22. Cross elasticity of demand (XED)<br />Measure of the responsiveness of the demand for a good or service to a change in the price of a related good<br />Substitute goods<br />Is goods that can be used instead of another such as coke and Pepsi. Substitute good has positive cross elasticity of demand<br />Complement goods<br />Goods which are used together, such as calculator and batteries. Complement goods have negative cross elasticity of demand. <br />
    23. 23. THEORY OF THE FIRM<br />Fixed cost<br />Are costs of production that do not change with the level of the output.<br />Eg. Land<br />Fixed Cost Graph <br />Cost<br />F<br />Quantity<br />
    24. 24. Variable costs<br />Are costs of production that vary with the level of output<br />Eg. Labor, Material<br />Cost<br />F<br />Quantity<br />
    25. 25. Total cost<br />Are the total costs of producing a certain level of output fixed costs plus the variable cost<br />Average cots<br />Is the average total costs of production per unit. <br />Marginal costs<br /> Is the additional costs of producing an additional unit of output<br />
    26. 26. Short run<br />Period of time in which at least one factor of production is fixed<br />SPAC1<br />SPAC5<br />SPAC2<br />SPAC4<br />SPAC3<br />
    27. 27. The long run<br />Is the period of time in which all factors of production are variable<br />SPAC1<br />SPAC5<br />SPAC2<br />SPAC4<br />SPAC3<br />
    28. 28. Law of diminishing average return<br />As extra units of a variable factor are applied to a fixed factor, the output per unit of the variable factor will eventually diminish<br />Diminishing Return<br />Cost<br />Quantity<br />
    29. 29. Law of Constant Return<br />As extra units are added, the increase in outputs will be equal to the increase in costs<br />Law of Constant Return<br />Cost<br />Quantity<br />
    30. 30. Law of diminishing marginal returns<br />As extra units of a variable factor are applied to a fixed factor, the output from each additional unit of variable factor will eventually diminish<br />Cost<br />Law of diminishing marginal Return<br />Quantity<br />
    31. 31. Economies of scale<br />Are any fall in long run unit costs that come about as a result of a firm increasing its scale of production<br />Diseconomies of scale<br />Are any increase in long run unit costs that come about as a result of a firm increasing its scale of production.<br />Total revenue<br />Is the aggregated revenue gained by a firm from the scale of a particular quantity of output.<br />
    32. 32. Average revenue<br />Is the total revenue received divided by the number of units sold. Usually the price is equal to average revenue. <br />Cost<br />A= D<br />Quantity<br />
    33. 33. Marginal revenue<br />Is the extra revenue gained from selling an additional unit of a good or service<br />Cost<br />A = D<br />Quantity<br />Mr<br />
    34. 34. Normal profits<br />Are the amount of revenue needed to cover the total costs of production, including the opportunity costs.<br />Mc<br />Cost<br />AC <br />A = D<br />Quantity<br />Mr<br />
    35. 35. Abnormal profits<br />Are any level of profit that is greater than the required to ensure that a firm will continue to supply its existing good or service. <br />Mc<br />Cost<br />AC <br />Abnormal Profit<br />A = D<br />Quantity<br />
    36. 36. Profit maximizing level of output <br />the level of output where marginal revenue is equal to marginal costs.<br />Shut down price<br /> Is the price where the average revenue is equal to average variable costs. Below this price, the firm or company will shut down in the short run.<br />The break even price<br /> Is the price where average revenue is equal to the average total cost. <br />

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