Chapters 1 & 2 Flashcards

1
Q

Opportunity Cost

A

Highest forgone benefit

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2
Q

Economics

A

Science that studies how to use our scarce resources to satisfy our unlimited needs

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3
Q

Microeconomics

A

Branch of economics that studies the behaviour of each individual economic unit

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4
Q

Macroeconomics

A

Branch of economics that studies the behaviour of the whole economy

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5
Q

Production Possibility Curve

A

Shows the different bundles from any two goods that we could produce using all available resources

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6
Q

Law of Increasing Opportunity Cost

A

The amount we have to sacrifice to produce one good instead of another because resources are not easily transferable from one use to another

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7
Q

Consumer Goods

A

Used for consumption

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8
Q

Capital Goods

A

Used for production

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9
Q

Specialization

A

Concentration on the production of one or few goods

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10
Q

Comparative Advantage

A

To be able to produce a good at a lower opportunity cost

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11
Q

Labour Intensive

A

Production uses more labour

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12
Q

Capital Intensive

A

Production uses more of capital

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13
Q

Free Market Economy

A

Private decisions determine how resources are allocated, “consumer sovereignty”

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14
Q

Command Economy

A

Government determines allocation of resources through central planning

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15
Q

Mixed Economy

A

Both private and public sectors determine allocation of resources

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16
Q

Positive Incentives

A

Used to encourage an activity by increasing benefits or lowering costs

17
Q

Negative Incentives

A

Used to discourage an activity by increasing benefits or lowering costs

18
Q

Goods

A

Items we desire or value

19
Q

Bads

A

Items we don’t desire or value

20
Q

Correlation

A

Two events or variable tend to occur together, but they do not cause each other

21
Q

Causation

A

One event or variable causes another event to happen

22
Q

Theory

A

An explanation for a phenomenon

23
Q

Hypothesis

A

A proposition or claim that can be tested

24
Q

Empirical Analysis

A

Examining data to see if a hypothesis is correct

25
Q

Efficiency

A

To get the most output from our resources

26
Q

Market Failure

A

Free market fails to achieve efficiency

27
Q

Monopoly

A

A single seller controls the entire means of production

28
Q

Ceterius Paribus

A

“Other factors kept constant”, in order to study the effect of one variable we must keep all other factors constant

29
Q

Fallacy of composition

A

“Mistake of generalizing”, if a certain behaviour is true at the individual level it may not be true at the group level

30
Q

Positive Statements

A

Objective statements, don’t reflect opinions, could be tested

31
Q

Normative Statements

A

Subjective statements, reflect opinions, not tested