econ chaapter 1 Flashcards
economics
the study of how agents choose to allocate scarce resources and how those choices affect society
marginal analysis
involves weighing additional benefits and additional costs
scarcity
unlimited wants, but limited resources
4 factors of production
land, labor, capital, and entrepreneurship
microeconomics
study of small economic units, looks ay decisions of individuals and firms, cost of production, different kinds of markets
macroeconomics
looks at growth, unemployment, inflation, GDP, and things that speed up/slow down economy
opportunity cost
the cost of the next best alternative, the thing you’re giving up
production possibilities curve
model that shows alternative ways we can use scarce resources to produce only 2 goods (starts off with a chart that is then plotted into a curve)
inefficient
any point on the inside of the PPC
efficient
on the curve of the PPC
impossible/unattainable
outside the curve of the PPC
law of increasing opportunity cost
the more you make of one thing, the more you have to give up making something else (give and take)
constant opportunity cost
when you produce more of one thing, you always give up the same amount of another thing
absolute advantage
the ability of an individual, firm, or country to produce more of a certain good
trade-off
what you could’ve done
opportunity cost
out of all the trade-offs, the one thing you really missed out on
explicit costs
traditional out of pocket costs associated with making a decision
implicit costs
behind-the-scenes opportunity cost when making a decision, the value of foregone time, money, etc.
marginal =
additional
law of diminishing marginal utility
as you consume anything, the additional satisfaction or joy you get from it will eventually decrease
equilibrium
the second principle of economics holds a situation in which no agent believes they would benefit personally by changing their own behavior
normative
analysis of what should be done
positive
analysis of what is actually done
