Chapter 2 Flashcards
____ is created when assets move from lower to higher valued uses
Wealth
An individual’s ____ for a good or service is the amount of money they are willing to pay for it.
Value
The biggest advantage of capitalism is that ______.
It creates wealth by letting people follow their self-interest
The difference between the agreed-on price and the seller’s value is called what?
Seller Surplus
_____ is the buyer’s value minus the price.
Buyer Surplus
Total Surplus = ______
Gains of trade
What is the zero-sum fallacy?
The fallacy of assuming that if someone is winning, someone else must be necessarily losing
______ often invoke the zero-sum fallacy to justify limits on profitability, prices, or trade
Policy makers
The absence of _____ contributes to poverty.
Property rights
Many poor countries survive largely on the wealth created in ____.
Underground/ Black markets
If you give people ownership to their property, they have an _____.
Incentive to take care of it, invest in it, and keep it clean
An economy is efficient if ______.
All assets are employed in their highest-valued uses
A good policy facilitates the movement of assets to _____.
Higher-valued uses
What is the one lesson of economics?
The art of economics consists in looking at both the immediate and long term effects of any act or policy.
Tracing the consequences of that policy for all groups
What is the one lesson of business?
The art of business consists of identifying assets in low-valued uses and devising ways to profitably move them to higher-valued ones.
