Chapter 1 Flashcards
scarcity
limited resources prevent us from getting everything we want
(income for consumers, factors of production for producers)
incentives
drive our choices
rewards encourage
penalties discourage
4 sections economics studies the choices of
individuals
firms
governments
other places/ societies
micro vs macro
micro- individuals/ business choices
macro- performance of national/global economy
economic question #1
how choices determine WHAT, HOW and FOR WHOM
4 factors of production
land, labor, capital, and entrepreneurship
3 types of captial
physical- tools, buildings, and machinery
financial- funds to purchase physical capital
human- knowledge, skills, and training
Land earns ______, labor earns ______, capital earns______,
entrepreneurship earns ______
land earns rent
labor earns wages
capital earns interest
entrepreneurship earns profts
do choices made for self interest also promote social interest? How?
yes, individuals contribute to taxes/pensions etc
firms create jobs, goods, & services
if a resource is efficient…
it’s impossible to make someone better off without making someone worse off
if a resource is inefficient…
someone CAN be better off without making someone else worse off, + society benefits
positive vs normative statements
based on facts vs based on suggestions
positive/ direct relationship =
positive slope (both X & Y are increasing or decreasing)
negative/ inverse relationship =
negative slope (one increases and the other decreases)
convex (non linear)
constantly decreasing
