Chapter 1 - Introduction To Economics

Question 1

Scarcity

Answer 1

Our inability to satisfy all our wants - infinite wants

Question 2

Why Must we make choice?

Answer 2

Because we face Scarcity

Question 3

Incentive

Answer 3

a reward that encourages an action or a penalty that discourages an action.

Question 4

Economics

Answer 4

the social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices

Question 5

Microeconomics

Answer 5

study of choices that individuals and businesses make, the way those choices interact in markets, and the influence of governments

Question 6

Macroeconomics

Answer 6

study of the performance of the national and global economics

Question 7

2 Big Economic Questions

Answer 7

How do choices end up determining what, how, and for who goods and services get produced?

when do choices made in the pursuit of self-interest also promote the social interest?

Question 8

4 Factors of production

Answer 8

Land
Labour/Human Capital
Capital
Entrepreneuship

Question 9

What do we produce?

Answer 9

Goods & Services

Question 10

Land

Answer 10

“gifts of nature”

Question 11

Labour // Human Capital

Answer 11

work time and work effort devoted to production

quality of labour depends on human capital, which is the knowledge and skill that people obtain from education, on-the-job training, and work experience

Question 12

Entrepreneurship

Answer 12

Human resource that organizes land, labour & capital

Question 13

Land earns…

Answer 13

Rent

Question 14

Labours/Human Capital earns….

Answer 14

Wages

Question 15

Capital earns…

Answer 15

Interest

Question 16

Entrepreneurship earns…

Answer 16

profit

Question 17

Self-Interest

Answer 17

choices you think are best for yourself

Question 18

Social Interest

Answer 18

Choices that are best for society as a whole

Question 19

2 dimensions in social interest

Answer 19

Efficiency & Equity

Question 20

Efficiency

Answer 20

is achieved when the available resources are used to produce goods and services:

1. at the lowest possible price
2. in quantities that give the greatest possible benefit

Question 21

Equity

Answer 21

Fairness.

Question 22

Six Key Ideas that define the economic way of thiking

Answer 22

Tradeoffs
Rational choices
Benefit
Cost
Margin
Incentives

Question 23

Tradeoffs

Answer 23

Different choices

Question 24

Rational Choices

Answer 24

Rational Choices are made by comparing benefits and cost

Question 25

Benefit

Answer 25

what you gain from making a choice

Question 26

Cost

Answer 26

What you must give up from/when making a choice

Question 27

Incentives

Answer 27

individuals choose based on their incentives

Question 28

Opportunity Cost

Answer 28

the highest valued alternative that must be given up to get it.

Question 29

Marginal Benefit

Answer 29

Benefit from pursuing an incremental increase in an activity

Question 30

Marginal Cost

Answer 30

opportunity cost of pursuing an incremental increase in an activity