ECO 201 Exam 1 Review Flashcards
Economics
the social science that studies production, distribution, and consumption of goods and services OR the study of allocation of LIMITED resources across UNLIMITED wants
What determines who gets: what, how, why, and when?
Scarcity
What are limited resources?
land, labor, capital, *entrepreneurship
What is land?
inputs that exist around us (natural resources)
What is labor?
human input/human capital
What is capital?
human made inputs (stuff that makes stuff) or anything we use to help us produce other stuff
Is money capital?
No, it its NON PRODUCTIVE CAPTIAL. Banks loan out money (potential capital) and it represents a firm’s ability to purchase capital
What is entrepreneurship?
bringing together land, labor & capital. Sometimes and sometimes not considered a resource.
What is technology?
the recipe by which we bring together land, labor and capital to make a good.
What is a market?
an exchange of info about value (doesn’t have to be transactions)
What is positive economics?
How the world DOES look like and how things ARE allocated
What is normative economics?
How SHOULD the world work and how SHOULD things be allocated
What is microeconomics?
- understanding how we allocate particular goods and resources
- understanding market failures
- how we as individuals or small groups make trade offs and the consequences of those trade offs
What is macroeconomics?
how nations make trade offs in terms of aggregate spending and production and in the public policy, and the consequences of those trade offs
What are the payments for land, labor, capital and entrepreneurship?
land=rent
labor=wage
capital=interest
entrepreneurship=profit
What is value?
what are willing to give up to get something we want
What is opportunity cost?
the thing or activity we gave up to get what we want or do what we do
What is the scarcity principle?
the opportunity cost of spending more time on any one activity is having less time available to spend on others
What is the PPC (PPF)?
- the max amount of 2 goods that can be produced in an economy
- shows the trade off or opportunity cost of increasing production of 1 good in terms of the other
- inputs are substitutes if the slope is constant (meaning there’s a constant opp. cost)
- bowed out curve = increasing opp. cost
What is absolute advantage?
when 1 person (firm, country) can produce a good using less time or resources than another
What is comparative advantage?
1 person (firm, country) if she/he/they can produce a good at a lower opportunity cost
How to determine comparative advantage
what you give up/what you make
How do you expand the PPC?
- change in technology
- an increase in resources (L,L,C)
How is a change in quantity demand determined?
- movement along the demand curve
- price change
