Chapter 1 Flashcards
Economics is concerned with
Efficient use of scarce resources to obtain the maximum satisfaction of societies unlimited wants
scarcity
restricts options and requires choices
opportunity cost
what is forgone for that choice
scarce resources 6
land
labour
- human capital
-capital
- investment
- entrepreneural ability
purposeful behaviour
people pursue oppportunities in order to increase their utility
- people make decisions with desired outcome in mind
- RATIONAL
marginal analysis
comparing costs and benefits
the individual 4
- facing trade-offs (must make best decisions)
- opportuninty costs
- choosing a little more or a little less (marginal analysis)
- influcence of incentives (taking BA OR MA)
interaction among individuals
- specialization and trade (make both countries best at what they’re producing)
- the effectiveness of markets (coordinating trade)
- role of govnt` (make sure competition is avaliable)
the economy as a whole
8 production and the standard of living (more produced better life)
9. money and inflation (income can imporve life)
10. inflation- unemployment trade off (one goes up other goes down)
scientific method
observe, formulate hypothesis, test, accept/reject, continue to test hypothesis
capital
NoT money, physical capital\
- tools, machines, factories
entreprenuers
takes incentive, business decisions, innovates, RISK taker
margin
extra
micro econ
concerned with individual units such as industries firms and households
- worms eye view
macro econ
concerned with economy as a whole
-birds eye view
positive economics
analysis of facts to establish cause and effect relationships (WHAT IS)
- it IS 25 degrees
normative econ
deals with judgements of what economy should be (WHAT OUGHT TO BE)
- it SHOULD be 25 out
entrepreneurs economic functions
- takes initiative
- makes business decisions
- innovates
- bears risk
production possibilities model
illustrates production choices
production possibilities model assumptions
- full employment (all avaliable resouces being used)
- fixed resources
- fixed technology
- two goods (consumer and capital- tools)
what law makes production possibilities curve concave
law of increasing opportunity
unemployment
- economy may not be operating at full employment
- points INSIDE of production possibility cueve
inside the PPC is what
unemployment or failure to achieve production efficienty
what is a right shoft in PPC mean
economic growth. more resources, land, capital, more workers
a growing economy has
- increas ein factor supplies
- imporoved factor quality
- tech advances
pitfalls to economic reasoning
- biases (personal opinion)
- loaded termonology (confuses concept)
- fallacy of composition (whats good for one is not good for all)
- post hoc fallacy (we assume an event caused another event… wearing lucky socks)
- correlation and causation ( what is cause is effect. people with education have high wages)
present and future choices
- save now for a better future
- present economic growth is focused on demand rather than saving for future
- overtime if saving, graph will grow outwards
rational self-interest
- not thte same as selfishness
- charities
rational self-interest
- not thte same as selfishness
- charities
economic principal
statement about economic behaviour or the economy that enables predication of the profitbale effects of vertain actions. combos of principals are incorporated into models
Predicting profit on certain economic moves.
things to know about economic principals
- generalizations (typical or average consumers)
- other things equal assumption
- expressed graphically
budget line
figuring out a econ prob by comparing 2 products consumers can purchase at a specified income
- varies with income
land
includes all natural resources used in production process
consumer goods vs capital goods
consumer satisfy wants directly, capital do so indirectly, production
PPC cueve demonstrates what
- different combos of goods and services that society can potentially produce in a full employed econ
