Chapter 1 & 2 Flashcards
what is scarcity? how does it affect economics?
resources are limited. forces society to decide who gets the product, who sells, and how much
opportunity cost
the trade off; the potential gain from alternative when choice is made
marginalism
theory in which individuals make decision on the purchase of an additional unit of good/service based on the additional utility received from it
sunk costs
investments that cannot be recovered - marketing, research, new software installation or equipment, salaries and benefits, or facilities expense
efficient markets
economy is benefitting as much as possible from scarce resources
- cannot improve without imposing cost
positive economics
description, quantification, and explanation of economic phenomena
normative economics
evaluatues situations and outcomes of economic behavior as morally good or bad
factors of production
inputs the go into producing good or service
- land, capital, labor, entrepreneurship
inputs/outputs
output=produce/service
comparative advantage vs absolute advantage
aboslute advantage = make most for least cost
comparative advantage - trade w/ lower opportunity cost
capital v consumer good
consumer good = products/services
capital = used to produce goods/services
production possibilities frontier (ppf)
shows combination of outputs that can be produced given current resources and technology
ppf-efficient output
ppf- law of increasing opportunity cost
consumer sovereignty
