Chapter 1 Flashcards
What is a resource
Anything that can be used to make something else
What is a scarce resource
When the quantity available is not large enough to satisfy all its uses
Opportunity cost
What you give up to get something
What is an example of scarcity
Fresh water in a town
Marley decides to watch a movie at a theatre with her friends instead of working for four hours where she would have earned $15 an hour. The movie ticket cost $10. What was her opportunity cost of going to the movie?
$70
What is thinking on the margin
It means you compare the costs and benefits of doing a little more of an activity vs doing a little less
Making small incremental changes to a plan and then comparing the costs and benefits of the change
What is an incentive
Something that motivates a person to perform an action
What does trade allow
For people to specialize in what they do best and buy a larger variety of goods and services at lower costs
If Canada is better than China at making airplanes, but China is better than Canada at making laptops, what should happen?
Canada should sell airplanes to china, and should buy Chinese laptops
What is a market economy
One where resources are allocated by the decentralized decisions of many businesses and people as they interact in markets for goods
How can governments help the economy
- Changing incentives with laws, regulations, taxes, and subsidies
- Maintain good institutions that enforce their laws and regulations
- Help promote equality in society
