Chapter 1: What Economics is all about? Flashcards
A science that deals with the allocation, or use, of scarce resources for the purpose of fulfilling society’s needs and wants.
Addison Wesley
The study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided
Case and Fair
The study of how households and firms make decisions and how they interact in markets.
Microeconomics
The study of economy-wide phenomena, including inflation, unemployment, and economic growth.
Macroeconomics
2 facts that dominates our lives
- Resources are limited
- Society has unlimited needs and wants
Economics dicides the ______ way of providing one to another.
Best
A means of deciding who gets what of the available
Rationing Device
A condition wherein the available scarce resources are not enough to satisfy people’s unlimited wants
Scarcity
- Same for everybody
- Never Change
- Must have
Needs
- Different for different people
- Always change
- Nice to have
Wants
Factors of Productions (resources used for production)
- Land
- Labor
- Capital
- Entrepreneurship
Refers to nation workforce. Includes anyone who works to produce goods and services.
Labor
The special skill that some people possess to organize the other factors of production
Entrepreneurship
Resources used for further production. Features (Man-made; Raises the productivity of other factors)
Capital
Includes all natural resources
Land
Factors of production and their corrsponding income rewards
- Land - Rent
- Capital - Interest
- Labor - Salary & Wage
- Entrepreneurship - Profit
Is the highest valued alternative forgone or forfeited when an action or activity is made.
Opportunity Cost
Is the cost of what you give up when one choice is made over another
Opportunity Cost
Giving up something in order to get something
Trade-off
Is always measured by how much you give up of the next best alterntive to get what you want.
Opportunity Cost
Illustrates the principle of opportunity cost for an entire economy
Production possibility curve
show all possible combinations of goods and services that can be produced if all of society’s resources are used efficiently.
Production possibility frontier
Basic Economic Problems
- What goods and services should be produced?
- How should these goods and services be produced?
- For whom are goods and services produced?
The way economic units are organized to come up with decisions on the basic economic problems
Economic System
The method used by a society to produce and distribute goods and services
Economic system
Types of Economic System
- Traditional Economy
2.Market Economy - Command Economy
- Mixed Economy
An economic system in which economic decisions are made on the basis of custome
Traditional Economy
An economy based on private ownership where individuals control the production, distribution and sale of goods.
Market Economy
A political system characterized by a centrally planned economy with all economic and poltical power resting in the hands of the government
Command Economy
An economy that is a mixture of both command and market economies
Mixed Economy
Goals of the Economy
- Economic Efficiency
- Economic Freedom
- Economic security
- Economic Equity
- Economic growth and innovation
- Value goals
- Safety Net
How much should you get paid for your services or lack of services.
Economic Equity
Making the most of the limited resources. An economy that can’t deliver good isn’t ________
Economic efficiency
Government programs that protect people during bad economic times
Safety Net
Innovation leads to growth, and economic growth leads to a higher standard of living.
Economic growth and innovation
Freedom from government intervention in the production and distribution of goods and services
Economic freedom
Securities pursue additional goals, such as environmental protection, universal medical care, etc.
Value goals
Assurance that goods and services will be available , payments will be made on time.
Economic Security
Things that people have in order to survive
needs
Things that people would like to have
wants
