Econ portfolio<br />Grace Shi<br />
Section 1 Definitions<br />Economics is a social science as it is concerned with the study of human behavior.<br />Microec...
Opportunity cost is the value of the next best alternative forgone as the result of making a decision. <br />Factors of pr...
Economic goods are scarce and their production involves opportunity costs <br />Free goods are gifts of nature supplied wi...
Economic growth entails an increase in a country's total output of goods and services and occurs where there is an increas...
Elasticity definitions<br />Price elasticity of demand is a measure of the responsiveness of the quantity demanded of a go...
Market definitions<br />A market is where buyers and sellers come together to establish an equilibrium price and quantity ...
Theory of the firm definitions<br />Fixed costs are costs of production that do not change with the level of output. They ...
Economies of scale are any fall in long-run unit average costs that come about as a result of a firm increasing its scale ...
Ways to measure output<br />Total product is the total output of the firm.<br />Average product is the total product over ...
Upcoming SlideShare
Loading in...5
×

Econ portfolio: definitions

1,069

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
1,069
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
7
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Econ portfolio: definitions

  1. 1. Econ portfolio<br />Grace Shi<br />
  2. 2. Section 1 Definitions<br />Economics is a social science as it is concerned with the study of human behavior.<br />Microeconomics is the study of the individual component parts of the economy. <br />Macroeconomics is the study of aggregates (totals) of economic activity. <br />Scarcity is an enduring inadequacy of resources<br />Ceteris paribus is making an assumption by holding all other factors constant (all other things being equal).<br />Utility is our perceived satisfaction from consuming a good or service<br />Marginal utility is our perceived satisfaction from consuming one additional good or service<br />
  3. 3. Opportunity cost is the value of the next best alternative forgone as the result of making a decision. <br />Factors of production:<br />Land includes all natural resources (minerals and other raw materials)<br />Labor includes all human resources <br />Capital includes all man-made machinery and equipment<br />Enterprise is the skill of taking risk to provide goods and services and make profits.<br />
  4. 4. Economic goods are scarce and their production involves opportunity costs <br />Free goods are gifts of nature supplied without labor and without limit.<br />In a market economy the forces of Demand and Supply determine resource allocation.<br />In a command economy the the state determines resource allocation.<br />In a mixed economy the forces of demand and supply and the state determine resource allocation.<br />
  5. 5. Economic growth entails an increase in a country's total output of goods and services and occurs where there is an increase in the productive potential of the economy and is best measured by the increase in a country's real level of output over a period of time (GDP). <br />Economic development entails a higher standard of living and is a process where there is improvement in the lives of all people in the country. <br />Sustainability is the ability of the environment to survive its use for economic activity.<br />
  6. 6. Elasticity definitions<br />Price elasticity of demand is a measure of the responsiveness of the quantity demanded of a good or service to a change in its price.<br />Elastic demand means that a change in the price of a good or service will cause a proportionately larger change in quantity demanded and inelastic demand means that a change in price of a good or service will cause a proportionately smaller change in quantity demanded. <br />Cross elasticity of demand is a 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 are goods that can be used instead of each other.<br />Complement goods are goods which are used together<br />Income elasticity of demand is a measure of the responsiveness of demand for a good to a change in income. <br />A normal good has a positive income elasticity of demand. As income rises, demand rises.<br />Inferior goods have a negative income elasticity of demand.<br />Price elasticity of supply is a measure of the responsiveness of the quantity supplied of a good or service to a change in its price. <br />An Indirect tax is an expenditure tax on a good or service. <br />A specific tax is shown as a parallel shift. <br />An ad valorem tax is shown as a divergent shift. <br />Incidence of tax refers to the amount of tax paid by the producer or the consumer.<br />
  7. 7. Market definitions<br />A market is where buyers and sellers come together to establish an equilibrium price and quantity for a good or service. <br />Demand is the willingness and ability to purchase a quantity of a good or service at a certain price over a given amount of time. <br />The law of demand states that as the price of a good or service rises, the quantity demanded decreases.<br />The demand curve is a graphical representation of the law of demand. <br />Supply is the willingness and ability of a producer to produce a quantity of a good or service at a certain price over a given amount of time.<br />The law of supply states that as the price of a good or service rises, the quantity supplied increases. <br />The supply curve is a graphical representation of the law of supply. <br />Equilibrium price is the market-clearing price.<br />A maximum price is also known as a ceiling price. It is a price set by the government, above which the market price is not allowed to rise. <br />A minimum price is also known as a price floor. It is a price set by the government, below which the market price is not allowed to fall.<br />A buffer stock scheme sets a maximum and a minimum price in a market to stabilize prices. <br />
  8. 8. Theory of the firm definitions<br />Fixed costs are costs of production that do not change with the level of output. They will be the same for one or any other numbers of units. <br />Variable costs are costs of production that vary with the level of output.<br />Total costs are the total costs of producing a certain level of output-fixed costs plus variable costs. <br />Average cost is the average (total) cost of production per unit. It is calculated by dividing the total cost by the quantity produced. <br />Marginal cost is the additional cost of producing an additional unit of output. <br />The short run is the period of time in which at least one factor of production is fixed—the production stage.<br />The law of diminishing average returns states that 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 />The law of diminishing marginal returns states that as extra units of variable factor are applied to a fixed factor, the output from each additional unit of the variable factor will eventually diminish. <br />The long run is the period time in which all factors of production are variable. <br />
  9. 9. Economies of scale are any fall in long-run unit average costs that come about as a result of a firm increasing its scale of production (output).<br />Diseconomies of scale are any increase in long-fun (average) costs that come about as a result of firm increasing its scale of production (output). <br />Total revenue is the aggregate revenue gained by a firm from the scale of a particular quantity of output (equal to price times quantity sold).<br />Average revenue is total revenue received divided by the number of units sold. Usually, price is equal to average revenue. <br />Marginal revenue is the extra revenue gained from selling an additional unit of a good or service.<br />Normal profits are the amount of revenue needed to cover the total costs of production, including the opportunity costs. <br />Abnormal profits are any level of profit that is greater than that required to ensure that a firm will continue to supply its existing good or service. (It is an amount of revenue greater than the total costs of production, including opportunity costs). <br />The profit-maximizing level of output is the level of output where marginal revenue is equal to marginal cost.<br />The shutdown price is the price where average revenue is equal to average variable cost. Below this price, the firm will shut down in the short term. <br />
  10. 10. Ways to measure output<br />Total product is the total output of the firm.<br />Average product is the total product over the unit of the variable factor. <br />Marginal product is the change in total product over the change in the unit of the variable factor.<br />
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×