econ vocab.docx - 1.4 command economy an economy where...

This preview shows page 1 - 2 out of 4 pages.

1.4 command economy an economy where economic decisions are passed down from government authority and where resources are owned by the government exports products (goods and services) made domestically and sold abroad globalization the trend in which buying and selling in markets have increasingly crossed national borders gross domestic product (GDP) measure of the size of total production in an economy imports products (goods and services) made abroad and then sold domestically market interaction between potential buyers and sellers; a combination of demand and supply market economy an economy where economic decisions are decentralized, resources are owned by private individuals, and businesses supply goods and services based on demand private enterprise system where the means of production (resources and businesses) are owned and operated by private individuals or groups of private individuals traditional economy typically an agricultural economy where things are done the same as they have always been done underground economy a market where the buyers and sellers make transactions in violation of one or more government regulations 2.1 The equation for any budget constraint is: Budget=P1 × Q1 + P2× Q2 budget constraint all possible consumption combinations of goods that someone can afford, given the prices of goods, when all income is spent; the boundary of the opportunity set law of diminishing marginal utility as we consume more of a good or service, the utility we get from additional units of the good or service tend to become smaller than what we received from earlier units marginal analysis examination of decisions on the margin, meaning a little more or a little less from the status quo opportunity cost measures cost by what is given up in exchange; opportunity cost measures the value of the forgone alternative opportunity set all possible combinations of consumption that someone can afford given the prices of goods and the individual’s income sunk costs

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture