Chapter 1 and 2 Vocab Flashcards
Opportunity Costs
loss of potential gain for something else
Comparative Advantage
the ability of an individual or group to carry out a particular economic activity (such as making a specific product) more efficiently than another activity
Marginal Analysis
an examination of the additional benefits of an activity compared to the additional costs incurred by that same activity.
Marginal Costs
the cost added by producing one additional unit of a product or service
-not understanding leads to reject advantageous possibilities
Externalities
costs or benefits to an unrelated third-party that arises as an effect of other parties activities
Abstraction
ignoring many details so as to focus on the most important elements of a problem
Correlation
two variables that tend to up or down together
-does not prove that either variable causes one another (does not imply causation)
Economic Model
simplified small scale version of an aspect of the economy
Opportunity cost is the correct measure of cost
Theory
try to explain economic phenomena, to interpret why and how the economy behaves and what is the best to solution
Behavioral Economics
combines elements of economics and psychology to understand how and why people behave the way they do in the real world
“At the Margin”
the contribution of each individual unit to the total product at the time that the unit is applied so that every unit can be thought of as having its own ‘marginal contribution’
Economics
The social science concerned with the way society chooses to employ scarce resources which have alternative uses to produce and distribute goods and services from present and future consumption
Positive Economics
deals with what “is”; descriptive; implies a testable hypothesis
Its a statement that can be tested
Ex. saying how tall you are
Normative Economics
Deals with what should be; prescriptive; implies value, judgement
belief/opinion
Root norm=value
Ex: “We should cancel student debt” or “its freezing out”
Inputs
any resources used to create goods and services
Factors of Production
broad categories - land, labor, capital, natural resources, entrepreneurship - into which we classify the economy is different productive inputs
Outputs
of a firm or economy are goods and services it produces
Freemarket
where individuals and businesses voluntarily buy and sell things
Gross Domestic Product(GDP)
money values of all final goods and services produced in the domestic economy and sold on organized markets during a specified period of time, usually a year
values of final goods and services produced and sold on organized markets during a specific time period
Closed Economy
Relatively closed economy exports and imports constitute a small fraction of GDP
Open Economy
An economy that trades with other nations in goods and services and perhaps also trades in financial assets. Relatively open is its exports and imports constitute a large share of its GDP
Recession
a period of time during which the total output of the economy falls
Markets
a means by which the exchange of goods and services takes place as a result of buyers and sellers being in contact with one another, either directly or through mediating agents or institutions
Transfer Payments
sums of money that the government gives certain individuals as outright grants rather than as payments for services rendered to employers
Ex. Social Security; unemployment benefits
Progressive Taxation
this is a tax where the average tax rate paid by an individual rises as income rises
Mixed Economies
Economy with some public influence over the workings of free market; Also some public ownership mixed in with private property
Macroeconomics
deals with issues such as unemployment. Inflation, growth, GDP…
Microeconomics
deals with specific units in the economy - individuals, households, firms…
Distribution
who gets what we produce
Consumer Sovereignty
we (as the consumer) decide what we want and what happens to the economy through our choices; ‘we are king’ ‘consumer votes’
