Ch 1: Scarcity, Opportunity Cost, Trade, and Models Flashcards
scarcity
the problem that arises from our limited money, time, and energy
economics
how individuals, businesses, and governments make the best possible choices to get what they want, and how those choices interact in markets
opportunity cost
the cost of the best alternative given up
incentives
rewards and penalties for choices
production possibilities frontier
maximum combinations of products or services that can be produced with existing inputs
absolute advantage
the ability to produce a product or service at a lower absolute cost than another producer
comparative advantage
the ability to produce a product or service at a lower opportunity cost than another producer
model
a simplified representation of the real world, focusing attention on what’s important for understanding
inputs
the productive resources (labor, natural resources, capital equipment, and entrepreneurial ability) used to produce products and services
positive statement
about what is; can be evaluated as true or false by checking the facts
normative statement
about what you believe should be; involve value judgments
microeconomics
analyzes choices that individuals i households, individual businesses, and government make, and how those choices interact in markets
macroeconomics
analyzes performance of the whole Canadian economy and global economy, the combined outcomes of all individual microeconomic choices
marginal benefits
additional benefits from the next choice
marginal opportunity costs
additional opportunity costs from the next choice
