deck_1091829 Flashcards
Economics
Economics
The study of humans behaving in response to having only limited resources to fulfill unlimited wants and needs. It analyzes the production, distribution, and consumption of goods and services.
Economics
Opportunity Costs
The value of the next best alternative that is given up to engage in an activity or exchange. (What you give up to do what you want)
Economics
Net Marginal Benefit
Rational people take action only when marginal (extra) benefits of that action are higher than marginal costs. If everyone behaves this way, society generates the most welfare.
Economics
Scarcity
Tension between limited resources, and our unlimited wants & needs. Because of scarcity, economies must make decisions about how to allocate resources.
Economics
Market Economy
Pricing of goods and services is guided by interactions of businesses and individuals. This is the opposite of a centrally planned economy. There aren’t really examples of pure market economies or planned economies, often there are mixed economies. USA has a market economy that is regulated and guided by certain government programs (Social Security) and the Monetary Policy of the FED.
Economics
Centrally Planned Economy
An economic system in which economic decisions are made by the state or government rather than the interaction between consumers and businesses. Seeks to control what is produced and how resources are distributed and used. While Market economies are the most efficient, democracy has other goals besides efficiency: safety, education, opportunity, health.
Economics
Invisible Hand
Coined by Adam Smith, it is the natural phenomenon that guides free markets and capitalism through competition for scarce resources. Smith assumed that individuals try to maximize their own good, and by doing so through trade and entrepreneurship, society as a whole is better off.
Economics
Capitalism
A system of economics based on the private ownership of capital and production inputs, and on the production of goods and services for profit. The production of goods and services is based on supply and demand in the general market (market economy), rather than through central planning (planned economy).
Economics
Socialism
An economic and political system based on public or collective ownership of the means of production. Socialism emphasizes equality rather than achievement, and values workers by the amount of time they put in rather than by the amount of value they produce. It makes individuals dependent on the state for everything from food to healthcare.
Economics
Communism
A political and economic ideology based on communal ownership and the absence of class. Communism asserts that in a capitalist society, the working class (proletariat) is exploited by the ruling class (bourgeoisie).The problem with communism is the knowledge problem, where without a price system, central planners cannot accurately determine what goods and services should be produced in what quantities. Communism is considered to have officially failed with the fall of the Berlin Wall and the collapse of the Soviet Union.
Economics
Socialism vs. Communism
Both are near opposites of capitalism, but socialism is less extreme. In socialism, workers receive wages and can spend how they please, as opposed to rations and stipends in communism. Still, the governing body owns and operates the means of production, and advancement is limited as their is no incentive to achieve more.
Economics
Microeconomics
Focuses on the decisions, spending, and performance of individuals or single businesses.
Economics
Macroeconomics
Studies the behavior of the aggregate economy. It examines economy-wide phenomena such as changes in unemployment, national income, rate of growth, GDP, inflation, and price levels.
Economics
Gross Domestic Product
The total amount of goods produced by an economy.
Economics
Unemployment
The percentage of people in the economy that are not working.
Economics
Inflation
The rate at which prices are rising.
Economics
Production Possibility Frontier
A curve depicting all maximum output possibilities for two or more goods given a set of inputs (resources, labor, etc.). Points not on the curve represent resources not being used efficiently.
