Chapter 1 Flashcards
What is Economics?
Economics is the study of how human beings coordinate their wants and desires, given the decision-making mechanism, social customs, and political realities of the society
What is scarcity?
goods available are too few to satisfy individuals’ desires
What are the three central coordination problems any economy must solve?
factors of production
- What, and how much, to produce
- How to produce it
- For whom to produce it
Does the degree of scarcity change or stay the same?
The degree of scarcity is constantly changing
What are the two parts Economics is divided into?
Micro Economics and Macro Economics
What is Microeconomics?
the study of individual choice, and how that choice is influenced by economic forces
What is Macroeconomics?
is the study of the economy as a whole
What is Economic Reasoning?
Make decisions by comparing costs and benefits.
What is marginal cost?
the additional or incremental cost over and above costs already incurred.
What is Marginal Benefit?
the additional or incremental benefit over and above what has already accrued.
what is the Economic decision rule
If the marginal benefits of doing something exceed the marginal costs, do it.
If the marginal costs of doing something exceed the marginal benefits, don’t do it
What is opportunity cost?
is the benefit forgone of the next-best alternative to the activity you have chosen
Should opportunity cost be more or less than the benefit of what you have chosen?
Should always be less than the benefit of what you have chosen
What is TANSTAAFL
There Ain’t No Such Thing As A Free Lunch
What is the Invisible Hand?
The invisible hand is the price mechanism that guides markets
