Ch 1. Foundations Flashcards
Scarcity
resources are insufficient to satisfy unlimited human needs and wants
Choice
choice must be made about what will be produces and what will be forgone
Efficiency
Best possible use of scarce resources to avoid waste
Allocative Efficiency
scarce resources are used to produce the goods and services that mostly satisfy society’s needs and wants
Equity
Being fair or just
Economic Well Being
levels of prosperity, economic satisfaction and standards of living among the members of a society
Sustainability
Long-term maintenance of viability of any particular activity of policy
Change
change between one situation and another situation that has been caused by a change in one or more variable
Interdependence
economic decision-makers interact with and depend on each other
Intervention
Refers to government intervention
4 factors of production
Land - natural resources
Labour - effort from the people
Capital - manmade factor of production
Entrepreneurship - human skill to seek new oppourtunities
Opportunity Cost
value of the next best alternative that must be sacrificed to obtain something else
Free Good
good that is not scarce, and therefore has a zero opportunity cost
3 Basic Questions
What/how much
How
For whom
Resource Allocation
Assigning available resources or factors of production to specific uses chosen among many possible alternatives
Free Market Economy
‘ideal type’ of economy based on the market approach to making economic decisions ; involve private sector ownership and decision-making and price rationing
Planned Economy
all economic decision-making is carried out by government planning, rather than reliance on prices determined in markets
Rationing
method used to apportion or divide something up between its interested users
Production Possibilities Curve (or Frontier)
all combinations of the maximum amounts of 2 goods that can be produced by an economy, when there is full employment of resources and efficiency in production
Economic Growth
increase in the quantity of output produced in an economy over a period of time
Circular Flow of Income
In any given time period, the value of output produced in an economy is equal to the total income generated in producing that output, which is equal to the expenditures made to purchase that output
Ceteris Paribus Assumption
All else remain equal
Refutation
Contradict it
Positive Economics
study of economics cased on the scientific method, used to arrive at knowledge about the economic world
Normative Economics
Bases of judgements about what economic goals and economic policies ought to be
