Economic Concepts Flashcards

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Value judgement

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A view about what is right or wrong, good or bad in a moral sense. Often includes words like 'should' or 'ought'.

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Economic activity

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The production, consumption, exchange, and distribution of goods and services.

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Production possibility boundary (PPB)

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Also known as the production possibility curve (PPC) or frontier (PPF), it shows quantities of two goods or services producible with full resource employment and current technology.

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Marginal utility

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The change in total utility from the consumption of one more, or one fewer, goods or services.

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Imperfect information

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When an economic agent lacks all the information needed to make a rational decision, or the information is distorted.

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Bounded rationality

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The idea that human limitations mean decision making is not completely rational. Individuals choose an option that is satisfactory rather than optimal.

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Rules of thumb

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Mental shortcuts, based on experience, that enable individuals to make decisions more quickly and easily.

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Excess supply

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The amount by which the quantity supplied exceeds the quantity demanded at the current price.

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Joint demand

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When two products are demanded together so that the demand for one product is directly related to the demand for the other product. Complementary goods such as printers and printer cartridges are in joint demand.

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Competitive demand

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When the demand for one product increases the demand for another product decreases. Substitute goods such as butter and margarine are in competitive demand.