Economics Micro & Macro (CliffsAP)

L

labor:Human effort used to produce goods and services, including human capital.

labor union:An organization of workers formed to give workers greater bargaining power in their dealings with

management.

laissez faire:No government involvement in an economic system.

land:The natural resources that come from land (soil) used to produce goods and services.

law of comparative advantage:The law that states that an entity benefits when it specializes or concentrates on goods

for which it has the lowest opportunity cost producing.

law of demand:The rule that as prices rise, the quantity demanded falls, and vice versa; there is an inverse relationship

between price and quantity demanded.

law of diminishing marginal returns:As more and more units of variable resources are used for production, the mar-

ginal product produced declines.

law of diminishing marginal utility:As more and more units of a good are consumed, the less total satisfaction that

good yields.

law of increasing opportunity costs:As more units are produced, the opportunity cost of producing those units increases.

law of supply:The idea that as prices increase, producers can increase their quantity supplied; there is a positive rela-

tionship between prices and quantity supplied.

limited liability:The concept that owners of a corporation are responsible for its debts only up to the amount they

invest in the firm.

limited resources:The idea that scarcity will always exist.

loanable funds market:The area of exchange where the suppliers and consumers of loanable funds exchange money

and loan contracts.

lobbying:The act of communicating with government representatives with the objective of swaying their votes in a

favorable manner.

long run:The period in which all inputs used for production can be changed.

long-run average cost curve:The curve that illustrates the average cost for a firm for the period of time where all factors

that are used to produce are interchangeable.

long-run average total cost:The average total cost when all factors can be changed.

long-run supply curve:The supply curve that illustrates price and quantity supplied at a point where all factors of

production can be changed.

loose monetary policy:A policy of the Federal Reserve that causes the money supply to rise.

Lorenz curve:A graphic illustration showing the amount of income inequality that exists in society at any point in time.

M

macroeconomics:The branch of economics that examines the behavior of the whole economy at once.

marginal cost:The additional cost experienced when one more unit is produced.

CliffsAP Economics Micro & Macro

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