1.1-1.3 Flashcards
Economics
The study of how people choose to use their limited resources to satisfy their unlimited wants (and needs)
Scarce resource
not available in sufficient quantities to satisfy all the various ways a society wants to use it
Factors of production (resources)
Anything that can be used to produce something else
Land
refers to all resources that come from nature, such as minerals, timber, and petroleum
Labor
the effort of workers
Capital
refers to manufactured goods used to make other goods and services (tools, machines)
Entrepreneurship
describes the efforts of entrepreneurs in organizing resources for production, taking risks to create new enterprises, and innovating to develop new products and production processes
Opportunity Cost
the value of the next-best alternative, or what you give up by choosing one alternative over another
Microeconomics
Focuses on how decisions are made by individuals and firms and the consequences of those decisions
Macroeconomics
Examines how the actions of all the individuals and firms in the economy interact to produce a particular level of economic performance as a whole
Positive economics
The branch of economic analysis that describes the way the economy actually works. There is a definite right or wrong answer
Normative economics
makes prescriptions about the way the economy should work
Business cycle
the short-run alternation between economic downturns, known as recessions, and economic upturns, known as expansions
Depression
a very deep and prolonged downturn
Recessions
periods of economic downturns when output and employment are falling
Expansions
sometimes called recoveries, are periods of economic upturns when output and employment are rising
Business cycle peak
the point at which the economy turns from expansion to recession
Business cycle trough
the point at which the economy turns from recession to expansion
Unemployment
the total number of people who are actively looking for work but aren’t currently employed
Unemployment rate
A good indicator of what conditions are like in the job market
High unemployment rate
Poor market; jobs hard to find
Low unemployment rate
Good market; jobs easy to find
Labor force
The sum of employment and unemployment
Output
the quantity of goods and services produced
Aggregate output
the economy’s total production of goods and services for a given time period, usually a year
Price stability
When the aggregate price level is not changing or is changing slowly
Inflation
When the aggregate price level is rising
Deflation
When the aggregate price level is falling
Production possibilities curve
Measures trade offs, Opportunity cost, efficiency, and economic growth. It illustrates all possible combinations of output.
Curve shift outward - economic growth
- Increases in the amount of resources
- technological advances
- new equipment/machinery
Curve shift inward - economic decline
- Loss of resources
- war
- natural disaster
- disease
Outside PPC line
Unattainable
Inside PPC Line
Inefficient
Concave outward PPC
Increasing opportunity cost
Constant PPC
opportunity costs are constant
Concave inward PPC
Decreasing Opportunity Cost
Absolute advantage
Condition that occurs when someone can produce more of a good or service with a given amount of time or resources
Comparative advantage
Condition that occurs when someone can produce at a lower opportunity cost than other producers (who can produce more efficiently)
Output formula
Opp. Cost (A) =B/A
Input formula
Opp. Cost (A) = A/B
