chapter 1 Flashcards
1
Q
what is economics
A
- the study of how rational individuals, firms, societies make decisions in a world where resources are scarce
2
Q
resources
A
- divided into land, labour capital
3
Q
scarcity and choice
A
- relative to our desires, existing resources are scarce
- enough resources to produce only a faction of goods and services wanted
4
Q
opportunity cost
A
- what is given up when an alternative is chosen
5
Q
production possibilities boundary
A
- illustrates the different combinations of 2 products society can produce given a specific set of resources in a full employment, full production economy
- above curve: unattainable
- on curve: optimized
- under curve (and on): attainable, show choice
- negative slope shows increasing opportunity cost
6
Q
maximizing utility
A
- individuals make decisions to do the best for themselves
- weigh benefits and costs to maximize best decision
7
Q
incentives
A
- people respond well to incentives at all levels
- prices, wages, etc
