Microeconomics Chapters 1-7

Paul Krugman/ Robin Wells

34 cards   |   Total Attempts: 182
  

Cards In This Set

Front Back
Opportunity Cost
What you must give up in order to get an item you want
Marginal Decisions
Decisions about whether to do a bit more or a bit less of an activity
Gains from trade
People can get more of what they want through trade than they could if they tried to be self-sufficient
Equilibrium
When no individual would be better off doing something different
Efficient
Resources are fully exploited to make some people better off without making others worse off
Equity
"fairness" people get their fair share
Production possibility frontier
Illustrates the trate-offs facing an economy that produces only 2 goods. It shows the maximum quanitty of one good that can be produced for any given quantity produced of the other
Factors of production
Resources such as land, labor, capital, and human capital, inputs that are not used up in production, and improved technology
Comparative advantage
Explains the source of gains from trade between individuals and countries
Absolute advantage
An ability to produce a particular good or service better than anyone else
Positive economics
Describes how the economy works
Normative economics
Prescribes how the economy should work
Individual consumer surplus
The diference between willingness to pay an price is the net gain to the consumer
Total consumer surplus
The sum of all individual consumer surpluses in a market, is equal to the area below the market demand curve but above the price
Individual producer surplus
Price of the good is above the producer's cost, creates profit for producer