Chapter 1 Flashcards
Root of Economics; lack of resources, Peoples wants exceed their needs
Scarcity
anything that can have an alternative; choosing one thing over another; forces choices; next best use of resources
Opportunity Cost
money already given up; no way of refunding it
sunk cost
Factor when making decisions; comes into play when sunk costs are present, or if you question whether to do something
time
How does the government play into the economy?
- )Sets private property rights & contracts, protects from theft and false claims
- ) Monetary System
- ) Unemployment Rate
- ) Competition
- ) Incentives
- ) Fairness
How are private property rights important to enforce?
It provides morale to create things due to their product/invention being protected
Why is the unemployment rate an important role for the government to interpret?
When UMPR is high, the government can handle the rate to lower it the best they can
What are the benefits from the government setting a monetary policy?
Provides purchases and profits to be made
Why does government need to handle competition within an economy?
To diffuse monopolies and create the competition; lower prices for all
3 types of economics according to Paul Krugman
- ) Greek Economics
- ) Media economics
- ) Airport Economics
Describe Greek Economics
lots of math + graphs (w Greek Symbols)
Describe Media Economics
Forecasts of how quickly the economy will go up or down
Describe Airport economics
predicts the next natural disaster so the economy will not suffer
benefit that you could’ve enjoyed, but chose something else
“true cost”
benefit gained from the next best alternative that you give up
“the cost”
the increase in benefits resulting from an action; used to describe the addition to benefits resulting from a decision
Marginal Benefit
Increase in costs resulting from an action; additional costs from decisions
marginal cost
definition meaning change in benefits and cost
marginal
Being an expert in one area of practice to avoid doing everything
specialization
What does specialization lead to?
Bartering, Markets
based on what two people can agree upon depending on their wants and needs; exchange one good for another
bartering
Place where trading of any kind occurs; unites buyers and sellers
Markets
How does the government change income distribution?
Taxes and subsidies
producing one or two goods (or services) versus producing everything on own
specialization
