BSSE Economics 1443 key terms

The condition in which available resources are insufficient to satisfy every human want at once, forcing individuals and societies to choose among competing uses.

The value of the next best alternative given up when a choice is made, measured by what that same resource could otherwise have produced.

A situation where gaining more of one good or goal requires accepting less of another, since resources used one way cannot be used elsewhere.

A curve showing the maximum combinations of two goods an economy can produce when all resources are fully and efficiently employed, given current technology.

The resource categories used to produce goods and services: land (natural resources), labor, capital (produced means of production), and entrepreneurship.

A condition in which resources are allocated so that no reallocation could make one person better off without making another worse off, and waste is minimized.

The principle that, other things equal, quantity demanded falls as price rises and rises as price falls, reflecting the inverse price-quantity relationship.

A downward-sloping graph of the quantities of a good buyers are willing and able to purchase at each price, holding other influences constant.

A change in the entire demand relationship caused by a non-price factor such as income, tastes, prices of related goods, or expectations, moving the whole curve.

The specific amount of a good buyers plan to purchase at one particular price, shown as a single point on a demand curve.

The principle that, other things equal, quantity supplied rises as price rises and falls as price falls, reflecting producers' profit incentives.

The price-quantity combination at which quantity demanded equals quantity supplied, so there is neither a shortage nor a surplus and price tends to rest.

The price at which buyers' planned purchases exactly match sellers' planned sales, clearing the market of both excess demand and excess supply.

A market condition in which quantity demanded exceeds quantity supplied at the prevailing price, typically pushing the price upward toward equilibrium.

A measure of how strongly quantity demanded responds to a price change, calculated as the percentage change in quantity divided by the percentage change in price.

A situation where the percentage change in quantity demanded exceeds the percentage change in price, giving an elasticity coefficient greater than one in absolute value.

A situation where the percentage change in quantity demanded is smaller than the percentage change in price, giving an elasticity coefficient below one in absolute value.

The percentage change in quantity demanded divided by the percentage change in consumer income; positive for normal goods, negative for inferior goods.

A product whose demand rises when consumer income rises, so its income elasticity of demand is positive.

A product whose demand falls when consumer income rises, so its income elasticity of demand is negative as buyers switch to preferred substitutes.

The principle that each additional unit of a good consumed within a period adds less extra satisfaction than the previous unit, so marginal utility declines.

The additional satisfaction gained from consuming one more unit of a good or service during a given period, holding consumption of other goods constant.

The consumer's choice of a bundle at which the last unit of spending on each good yields the same marginal utility per unit of price, exhausting the budget.

The principle that adding more of a variable input to fixed inputs eventually yields smaller and smaller additions to total output.

The extra output produced by employing one additional unit of a variable input, such as one more worker, while other inputs stay fixed.

An expense that does not vary with the quantity produced in the short run, such as rent on a factory or insurance premiums.

An expense that changes directly with the level of output, such as wages for hourly labor and payments for raw materials.

The increase in total cost from producing one additional unit of output, equal to the change in total cost divided by the change in quantity.

Total cost divided by quantity produced, combining average fixed cost and average variable cost to show cost per unit at a given output level.

The output level at which marginal revenue equals marginal cost, the point where producing more would add more to cost than to revenue.

The additional total revenue earned from selling one more unit of output, equal to the change in total revenue divided by the change in quantity sold.

A market structure with many small sellers, identical products, free entry and exit, and full information, so each firm is a price taker facing a horizontal demand curve.

A seller that must accept the market price because its own output is too small to influence price, typical of firms in perfectly competitive markets.

A market with a single seller of a product having no close substitutes and with high barriers to entry, giving the firm substantial price-setting power.

Obstacles that keep new firms out of an industry, such as legal licenses, patents, control of key resources, or economies of scale.

A market dominated by a few large sellers whose decisions about price and output are interdependent, so each firm must anticipate rivals' reactions.

A market with many sellers offering differentiated products, free entry and exit, and some pricing power derived from brand or product differences.

Demand for a factor of production that exists only because of demand for the goods and services that factor helps produce.

The extra revenue a firm earns from hiring one more unit of an input, equal to marginal product multiplied by marginal revenue of output.

The markets in which labor, capital, land, and entrepreneurship are bought and hired, determining wages, interest, rent, and profit.

A cost or benefit of an activity that falls on people who did not choose to bear it and is not reflected in market prices.

An uncompensated cost imposed on third parties by production or consumption, such as pollution, causing the market to overproduce the good.

A tax set equal to the marginal external cost of an activity, designed to make producers internalize the harm and reduce output toward the efficient level.

A good that is both non-rival and non-excludable, so one person's use does not reduce another's and non-payers cannot easily be excluded.

The tendency for people to enjoy a non-excludable good without paying for it, which leaves private markets unable to supply it efficiently.

A situation in which an unregulated market fails to allocate resources efficiently, for example because of externalities, public goods, or market power.

The market value of all final goods and services produced within a country's borders during a specified period, usually a year or a quarter.

The value of final output measured at the prices prevailing in the year of production, so it rises with both quantity and price changes.

The value of final output measured at constant base-year prices, adjusting nominal GDP so that changes reflect quantity rather than price movements.

A price index equal to nominal GDP divided by real GDP, multiplied by 100, used to measure the overall price level of domestically produced output.

The number of unemployed persons actively seeking work divided by the total labor force, expressed as a percentage.

The sum of employed and unemployed persons who are actively looking for work, excluding those not seeking employment.

Short-term joblessness arising while workers search for new positions or move between jobs, even when suitable vacancies exist.

Joblessness caused by a mismatch between workers' skills or locations and available jobs, often following technological change or shifts in industry.

Any generally accepted asset used to buy goods and services and to settle debts, serving as a medium of exchange, unit of account, and store of value.

The total amount of money circulating in an economy at a point in time, commonly measured by narrow aggregates such as currency plus checkable deposits.

The institution that manages a nation's money supply, issues currency, supervises banks, and acts as lender of last resort.

Central bank purchases or sales of government securities in the open market, used to expand or contract bank reserves and the money supply.

The minimum fraction of deposits that banks must hold as reserves rather than lend out, set by the central bank as a tool of monetary control.

The ratio of the change in the money supply to a change in bank reserves, equal to one divided by the reserve requirement ratio when all conditions are met.