Chapter 1 Flashcards
Actual tangible things we buy
Goods
Must be made between one item in another and must go through a process
The biggest problem in economics
Scarcity
In tangible things we buy
Services
Natural resources and materials needed to produce
Land
Physical work needed to produce
Labor
Skills and knowledge education
Human capital
Machines and tools buildings
Physical capital
The ideas and risks needed to start business
Entrepreneurship
Costs you can actually see and Count when you make an economic decision
Explicit cost
Hidden costs thought as something that is given up in order to gain something else
Implicit cost
Total cost of a decision on next best alternative not chosen
Opportunity cost
The amount of happiness gained by making a choice
Utility
Allows people to measure the cost of something against the value of the utility gained when the action is taken
Cost-benefit analysis
Utility must be equal to or exceed opportunity cost
The maximization rule
Getting more output with a lesser amount of inputs
Efficiency
When utility is increased due to the mass production of items lowering cost
Economic growth
A worker specializes in a specific task in making something or on a specific career
Specialization
Dividing the completion of a job into several basic tasks it takes to create something
Division of labor
Produced and meant to be consumed or used up
Consumer goods
A graphical representation of a society’s total ability to produce using all of its resources
Production possibilities frontier
A collection of rules values laws and activities that can help to explain how different societies deal with the basic problem of scarcity
Economic system
Economic decisions are made by tradition through past practice over many generations
Traditional economy
Major economic decisions are made by central planning Authority
Command economy
Economic decisions are made by individuals
Market economy
Economy that incorporates parts of all three economic systems
Mixed economy
Focuses on facts and cause-and-effect relationships
Positive economics
Incorporates value judgments about what the economy should be like or what particular policy action should be recommended to achieve a desirable goal
Normative economics
Examines either the economy as a whole or its basic subdivisions or aggregates such as the government household and business sectors
Macroeconomics
Part of economics concerned with individual units such as a person a household a firm or an industry
Micro economics
