Chapter 1 Flashcards
10 Key Concepts to retain for life (The Individual (4) )
Facing Trade Offs, Opportunity Costs, Choosing little more/less, Influence of Incentives
10 Key Concepts to retain for life (Interaction among individuals (3) )
Specialization and Trade, Role of Governments, Effectiveness of Markets
10 Key Concepts to retain for life (Economy as a whole (3) )
Production and standard of living, money and inflation, Inflation-Unemployment trade off
Facing Trade Offs
Products are scare, you must make trade offs and choices
Opportunity Cost
cost of the choice you make is what you give it up for
Choosing a little more/less
Choices made at margin do I buy more or less
Influence of incentives
choices influenced by motives and encouragements
Specialization and trade
trade usually will improve well being of participants
effectiveness of markets
coordinates trade among individuals groups and nations
Role of Governments
occasionally improve the coordinating function of markets
production and standard of living
standard living of a person in country is dependent on its production of goods and services
Money and Inflation
more money printed means growth of output of goods and services, this can lead to inflation
unemployment trade off
in short run society faces a short run trade off between inflation and its level of unemployment
Economic problem
wants greater then resources needed to make those desires
scarcity
resources limited so restricts options and requires choices
human utility
pleasure happiness satisfaction obtained from consuming good or service
no free lunch?
choices always come with a cost
purposeful behaviour
individuals are rational humans want to make optimal choices but emotions ruin it
Marginal Analysis
Comparing Benefits and Cost
Economic Principle
Widely accepted economic theory about economic behaviour
Economic Theories contain (4)
purposeful simplification, generalization, other things equal, graphical expression
purposeful simplification
full economic reality itself is too complex simplify is better analysis
generalization
principles are generalized relating to groups, facts, data. observations to identify a part of the whole as the whole
other things equal
only 1 variable changes, all other factors remain constant
microeconomic
concerned with decision making by individual customer, workers, household, firms ex price of product, income,
macroeconomics and what does it focus on
examines performance and behaviour of economy as a whole, focus on economic growth, business cycle, interest rate, aggregates
aggregate
collection of specific economic units treated as one unit
positive economic statement
the facts, WHAT IS actually happening, numbers
normative economic statement
subjecting, describes what economy SHOULD be like
economic problem
need to make choices, wants unlimited while resources and means limited. Choices have trade off and have oppt cost
Budget Line Contrast (5)
point on graph=consumption bundle, fractions allowed, attainable and efficient=on line, attainable and inefficient=inside line, unattainable=outside line
Is oppt cost constant on budget line
yes
Factors of production/inputs
all natural, human, and manufactured, resources, that go into production of goods and services
Land
gifts of nature, natural resource
labour
physical actions and mental activities that people contribute to the production of g/s
capital
manufacturing aids used in production of goods ex machines tools
Entrepreneurial ability 1. is it apart of labour 2. What are the roles of it (5)
- No
2. make routine pricing decisions, innovate, create market demand, take risk and make decisions
Assumptions of Production Possibility Curve (4)
Full employment, Fixed resources, fixed technology, two goods
full employment
economy is employing all its available resources
fixed resources
quantity and quality of the factors of production are fixed
fixed technology
methods used to produce output is constant
consumer goods
products that satisfy wants
capital goods
products we produce
law of increasing opportunity costs (3)
shape is concave, resources not completely adaptable to alternate uses. the more we make the more each additional costs
marginal benefit
satisfaction or utility a consumer receives when additional good or service is purchased
marginal cost
change in total cost to produce additional good or service
MB>MC
MB=MC
MB < MC
Produce more
remain same
scale back
Pointes under PPF Curve
unemployment and productive inefficient
unemployment and productive inefficiency
economy not operating at full potential, using all available resources, or producing optimal amount
ways to grow economy and shift production possibilities curve
increase factor supply, and quantity, advance technology.
STUDY GRAPHS
budget line, PPF, oppt cost, economic growth, MB/MC
