CH1- Basic economic ideas and resource allocation Flashcards
What is the fundamental economic problem?
Where people’s wants are unlimited (disregarding their income) and resources are less
What is opportunity cost?
Making a choice between between 2 alternative wants
What is the difference between macro and micro economics?
Micro- Study of of individual market’s (households, businesses, consumers) It explains why some consumers buy some goods and some do not
Macro- Study of the market or economy in a broader level (A country’s economy compared to another company’s economy)
Reward for land, labour, capital, enterprise.
Land- rent
Labour- Salary
Capital- Financial return that is earned, capital resource that is rented
Enterprise- profit
What is planned economy?
An economy where the market decisions are mostly taken by the government
What is mixed economy?
Where the market decisions are made by the economy (population) and the government
What is market economy?
An economic system where most decisions are taken by the economy.
What are excludable and non-excludable goods?
Excludable: Where it is possible to stop someone from consuming a good or service (mostly private goods that you have to pay for)
Non-excludable: Freely available goods and nothing can be done to prevent its consumption.
What are rival and non-rival goods?
Rival: Where by consuming a product, the amount doesn’t decrease
Non-Rival: The amount of quantity available for consumption does not diminish.
What are private goods?
Goods that are consumed by one person and not available to anyone else. (food, clothes)
What are free goods?
products with no prices, free to all (rainfall, air we breathe)
What are (pure)public goods?
Goods that are non-excludable and non-rival. Available to all
What are quasi-public goods?
Either excludable and non-rival or non-excludable and rival
Who is a free rider?
Someone who does not pay to use a public good (toll)
What are merit goods?
Goods that are wanted by the consumers but are underprovided in the market.
