Chapter 1 Flashcards
What is the economic problem
Human wants exceed resources available to satisfy them.
Economics
The science of scarcity since it concerns the inequality of wants and resources.
Utility
Is the economists term for satisfaction or happiness.
Disutility
Means unhappiness or dissatisfaction
Good
Something that brings utility
Economic good
Is so scarce someone will pay for it.
Bad
Brings disutility
Economic bad
Is so plentiful we are willing to pay to remove it.
4 resources or factors of production
Natural resources
Capital
Labor
Entrepreneur ship
Natural resources
Or land are the gifts of nature
Capital
Human made goods used to make other goods
Labor
Human work.
Entrepreneurship
Process f bringing together the other factors to produce goods.
What is the goal of business
To maximize profits
What is the goal of a person
To maximize their utility
Opportunity cost
Is what we give when we make a choice.
It is explicit cost plus implicit cost, where explicit costs are paid in money and implicit costs are non money factors such as time.
Globalization
Is the partial integration of the economies of different countries.
What do choices require us to consider
Both opportunity costs and benefits.
What do the best choices have
Highest benefits relative to opportunity costs.
What does science rely on
Scientific method which starts with observation of the world , which are explained by hypothesis.
Hypothesis must be tested before conclusion can be drawn.
What scientists believe about theory
Theory can be disproved, but never completely proven.
Ceteris paribus is a phrase meaning
Everything else held constant.
In economics, when we change the value of one variable, we must
Hold all variables constant to isolate the effect of the change.
Why economists cannot generally do science through experiments
As they must use mathematical and statistical models to explain.
Model
Is a simplification of a part of the world.
Microeconomics
Considers the individual person, single business or government
Macro economics
Is concerned about the entire economy, total income and overall employment.
Scarcity
-means that resources are always scarce relative to wants.
Implicit cost
-non money costs.
Explicit costs
-money related
Positive theories
-that is not to be driven by our personal beliefs, but by data , analysis and observations .
Judgment free
Starts with a question
Normative theories
-contain value judgment
Starts with an assumption
In here the hypothesis is not testable in a scientific way.
