Chapter 1 - Economic Issues and Concepts Flashcards
What is productivity growth and should it increase or decrease?
Output or income/hrs of work effort
Increase
Why is the population aging and what are the 2 consequences?
Decrease in fertility and life expectancy increase
Labor supply shortage, increase in public care spending
What are some other issues of pressing concern?
Climate change Global financial stability Rising govt debt Globalization Intl' trade (has benefits and challenges) Growing income inequality
Describe one of society’s 3 resources: land (+ex)
Natural endowments
Forests, lakes, crude oil, minerals
Describe one of society’s 3 resources: labour
Workers
Mental and physical human resources
Describe one of society’s 3 resources: capital (+ex)
Manufactured aids to production
Tools, machinery, building
Differentiate goods and services
Goods: tangible (cars and shoes)
Services: intangible (legal service, education)
Differentiate production and consumption
Production: act of making goods and services
Consumption: act of using them
What is scarcity?
The need for choice
What is opportunity cost?
Value of next best alternative thats forgone when an alternative is chose - an associated cost
In a graph, what does the sloped/budget line represent?
Border between attainable and unattainable combos
When is one attainable vs unattainable?
Attainable: on or inside budget line
Unattainable: outside budget line
What is a PPB and what does it illustrate?
Production possibilities boundary
Scarcity, choice, opportunity cost
What is resource allocation?
Quantities of various goods that are produced
Why are resources sometimes idle?
Economy operating inside its PPB
What causes an outward shift of the PPB?
Growth in productive capacity
Differentiate micro and macro
Micro: whats produced and how, whats consumed and by whom
Macro: idleness of resources and growth of economy’s productive capacity
What did Adam Smith do?
Spontaneously generated economic order is relatively efficient
When are transactions self-organizing?
When the economy is based on free-market
What is efficiency?
Goods and services produced with least possible amount of resources
What do sellers and buyers do when prices change?
Sellers sell more when prices are high
Buyers buy more when prices are low
Who are the 3 decision makers?
Consumers, producers, govt
What is a marginal decision?
Deciding if they’re better off buying or selling a little more or less
What two characteristics does production display?
Specialization of labour
Division of labour
Describe specialization
Allocation of different jobs to different people
Why is specialization more efficient than self-sufficiency?
Individual abilities differ
Focusing on one activity leads to improvements
Describe division
Breaking up production into a a series of specialized tasks
_ greatly facilitates _, which facilitates _
Money, trade, specialization
What does money eliminate?
Barter
What are the two major causes of globalization?
Rapid reduction in transportation costs
Revolution in IT
What are the 3 types of economic systems?
Traditional
Command
Free-market
In practice, every economy is a _ economy
Mixed
What did Karl Marx do?
Argued that free-market economies can’t be relied to generate a “just” distribution of output
Markets or govt policy?
Markets work well but sometimes govt policy can improve the outcome for society as a whole
