Chapter 1 Getting Started Flashcards
The condition that arises because wants exceed the ability of resources to satisfy them. ( Our inability to satisfy all our wants)
Scarcity
The social science that studies the choices that individuals, businesses, governments and entire societies make as they cope with scarcity, all the things that influence those choices, and the arrangements that coordinate them.
Economics
The choices that are best for the individual who makes them.
Self-Interest
The objects and the actions that people value and produce to satisfy human wants.
Goods and Services
The study of the choices that individuals and businesses make and the way these choices interact and are influenced by governments.
Microeconomics
The study of the aggregate (or total) effects on the national economy and the global economy of the choices that individuals, businesses, and governments make.
Macroeconomics
The expansion of international trade and the production of components and services by firms in other countries.
Globalization
The choices that are best for society as a whole.
Social Interest
What are the two dimensions of social interest?
Efficiency (make a big pie) and Equity (share it fairly)
The ability of each of us to satisfy our wants is limited by
Time we have, income we earn and the price we pay for things we buy.
Our ability to satisfy our wants is limited by what productive resources?
gifts of nature, our labor and ingenuity, and the tools and equipment that we ave made.
The subject of Economics has two broad parts which are_______ and _______.
Microeconomics and Macroeconomics
What are the two questions that define the scope of economics?
How do choices end up determining what, how and for whom goods and services get produced.
and
When do choices made in the pursuit of self-interest also promote the social interest?
_____ determines the quantities of products and services we produce
What
_____ are goods and services produced? (pen and paper vs computer)
How
_____ are goods and services produced? Determined by the income we make and the prices we pay for goods and services. ( college graduate vs HS diploma, doctor vs nurse, man vs woman)
For Whom
Major technology changes such as the computer chip
Information Revolution
Entrepreneurs are in pursuit of ____ _______
Big rewards
A choice is a ______
tradeoff
_____ is what you must give up to get something.
Cost
_______ is what you gain from something.
Benefit
People make _____ ______ by comparing benefits and costs.
rational choices
Most choices are _____ _____ choices made at the margin.
“how much”
Choices respond to ______
incentives
An exchange - giving up one thing to get something else.
Tradeoff
The _______ _____ of something is the best thing you must give up to get it.
(movie ticket cost a sandwich)
what must be given up not the cost
Opportunity cost
The _______ from something is the gain or pleasure that it brings, measured by what you are willing to give up to get it.
Benefit
Benefit is determined by
personal preferences
Economists measure benefit as the most that a person is _____ ____ _____ _____ to get something.
willing to give up
A basic idea of economics is that in making choices, _____ ____ ______.
people act rationally
A choice that uses the available resources to best achieve the objective of the person making the choice.
Rational choice
How do people choose rationally?
by comparing the benefits and costs of the alternative choice that makes net benefit (benefit minus cost) as large as possible.
A choice on the _____ is a choice that is made by comparing all the relevant alternatives systematically and incrementally.
Margin
AKA “Border”and “edge”
The opportunity cost that arises from a one-unit increase in an activity. The ________ ____ of something is what you must give up to get one additional unit of it.
Marginal cost
The benefit that arises from a one-unit increase in an activity. The ________ _______ of something is measured by what you are willing to give up to get one additional unit of it.
Marginal Benefit
When the marginal benefit from something _____ its marginal cost, the choice is rational and it is not possible to make a better choice.
equal
A reward or penalty - a “carrot” or a “stick” - that encourages or discourages an action.
Incentive
If the marginal cost of seeing a movie is ____ than the marginal benefit from it, seeing the movie adds more to benefit than to cost. your net benefit increases, so your rational choices is to see the movie.
Less
If the marginal cost of the movie _____ the marginal benefit from it, seeing the movie adds more to cost than to benefit. Your net benefit decreases, so your rational choice is to NOT see the movie.
Exceeds
A change in marginal benefit or a change in marginal cost changes the ________ that we face and leads us to change our actions.
Incentives
a central idea of economics is that by observing _______ ___ _______, we can predict how choices change.
changes in incentives
The economic way of thinking provides you with tools for making decisions in all aspects of your lives including_____, ______ and _______
Personal, Business and Government
Should you take a student loan, get a weekend job, rent an apartment or volunteer your time are examples of ________ decisions
Personal
Should Texaco get more oil from the Gulf of Mexico or from Alaska is an example of ________ decisions
Business
Should there be a special ax to penalize corporations that send jobs overseas is an example of __________ decisions
Government
_________ and _________ decisions are made by evaluating the marginal benefit and marginal cost.
Personal and Business
In additional to evaluating the marginal benefit and marginal cost, __________ decisions also involve an investigation of the interactions of individuals and businesses.
Government
Economists try to understand and predict the effects of economic forces b using the __________ _______ first developed by physicists.
Scientific Method
The scientific method is a commonsense way of systematically checking what works and what doesn’t beginning with a question about _____ and _____ arising from observed facts.
cause and effect
A scientists second step is to build a _____ that provides a possible answer to the question of interest.
model
A description of the economy or a part of the economy that includes only those features assumed necessary to explain the observed facts.
Economic Model
A model is like a _____
Map
In economics, we use __________ and _____ - based models.
Mathematical and graph
A scientists third step is to check __________ of a proposed model against the facts by using ________ experiments, __________ investigations and _________ experiments.
predictions
natural experiments
statistical investigations
laboratory experiments
A ________ experiment is a situation that arises in the ordinary course of economic life in which the one factor of interest is different and other things are equal or similar.
natural
A ___________ investigation looks for a correlation - a tendency for the values of two variables to move together (either in the same direction or opposite directions) in a predictable and related way.
statistical
A __________ experiment puts people (often students) in a decision-making situation and varies the influence of one factor at a time to discover how they respond to changed incentives.
laboratory
Disagreements that can’t be settled by facts are _________ - disagreements about what “should be”. These are subjective values and can not be tested.
normative
Disagreements that can be settled by facts are ________ - disagreements about what is. These can be settled by careful observation of facts.
Positive
Critical Thinking is thinking that is _______ and ____-_____.
logical and fact based
________ ________ is thinking that
- Begins with a question
- Clarifies the question
- Things with an open mind about how to answer the question
- Identifies potential answers
- Seeks the relevant facts to check the potential answers
- Ends with a well-reasoned answer
Critical Thinking
