econ exam 1 Flashcards
Scarcity
things we want are those that are in short supply,
Republic
collections of groups
Economic Problem
We always want more (unlimited wants)
Limited resources
Scarcity (best describes economics)
Opportunity Cost
the opportunity cost of a choice is whatever we give up when we make it
Explicit Cost
payments that are actually made (money)
Implicit Cost
non money
The Margin
the idea, that good decisions are made by considering the value of adding one more,
Marginal Cost
defines supply (cost of one more)
Marginal Benefits
the cost or benefit of one more or one less of something
Rational Behavior
maximizing our utility;what we think is best for us
Good
something that creates utility or makes you “happy”
Economic Good
If you are willing to pay for it, it is an economic good
Utility
the economist’s term for happiness or satisfaction
Bad
Disutility (losing something you suffer disutility its a bad)
Economic Bad
Willing to pay to get rid of it? That is an economic bad
Disutility
negative utility
Land
natural resources and ground
Labor
workers
Capital
Machines made by people
Entrepreneur
risk taker
John Locke
Every man has a property in his own self
Natural Law
guarantees that something is good and legitimate by providing for a check and a reasoning about what is not good.
Mercantilism
an economic policy where a nation aims to maximize its wealth and power by encouraging exports and restricting imports
Classical Liberals
political tradition and a branch of liberalism that advocates free market
Adam Smith
Scottish economist and philosopher “The Wealth of Nations” 1776
Natural Price
equilibrium (adam smith)
Equilibrium
balance in the marketplace
Public Good
best provided by a gov/central authority
Non-excludable
products or services that cannot prevent certain people from using them.
Common Property Resource
is something that is jointly owned by all
Non-rivalous
i can take in a view of a sunset and some else can and nothing diminishes
Externality
when a person makes a choice/exchange they can pass some of that cost onto someone else or benefit
Moral Hazard
going to enter a contract w somebody and they are hiding from you
Rules and Regulations
Asymmetric Information
what happens when you don’t have perfect info
seller knows more about it than buyer
-pay more than what a car is worth
3 Questions
What to produce?
How to produce?
Who benefits?
Capitalism
Market determine the prices of goods
Markets set input prices
Socialism
means that the government owns the capital (usually theorized as “the people” own the capital), the government makes the decisions about allocation of resources and prices, and the workers and institutions are supposed to do what is best for society, not what is best for themselves.
Self-Interest
people and businesses are supposed to do what they think is best for themselves, to be motivated by their own interests.
Social Darwinism
people are poor its nature that made them poor rich are rich because they are “better”
Laissez Faire
the economy will work the best as long as the government keeps their hands off
Planning
command economy is done by planning
Utopian Socialism
socialism that is achieved through the moral persuasion of capitalists to surrender the means of production peacefully to the people.
Scientific Socialism
karl m
a social, economic, and political theory that uses scientific methods to understand and predict social and economic trends.
Command Economy
the government provide the health care, or prevent oil companies from artificially raising prices, or stop one tech company from buying and controlling all the social media apps.
Fascism
sought to eliminate the autonomy of large-scale capitalism and relegate it to the state.
Shortage
=Prices too low
Legislative Branch
makes laws
Separation of Powers
the division of government responsibilities into distinct branches to limit any one branch from exercising the core functions of another
Executive Branch
carry out laws
Judicial Branch
interprets the law
Montesquieu
The Founding Fathers took their view of separation of powers from a dude named
Senate
laws come out of
Has more powers than the house does
100 members
2 from each state
Min of 30 yrs old
6 yr terms
Most power and authority
Senate has more experienced members than house
Best, brightest, smartest
House of Representatives
laws come out of
435 members
Max number they could have 10,000 and min is 50
Appropriated by population of each state minimum 25 yrs old
2 yr term
At least 1 in each state
President
the commander in chief of the military
has a cabinet
Makes treaties with the advice and consent of congress
Appoints Ambassadors w the advice and consent of Congress
Appoints supreme court justices, with the advice and consent of congress
The president must be a natural born citizen
Must be at least 35 yrs old
Serves for 4 yrs and may be reelected once
In most states the candidate w the most votes gets all the electoral votes
Presidents are picked by electores, one for each senator and representative
Advice and Consent
Secretaries are nominated by the president with the advice and consent of congress
Electoral College
process which includes the: Selection of electors. Meeting of electors who cast votes for the president and vice president.
Free Rider
people who get the thing but don’t pay
“General Welfare”
a section of a constitution or charter that allows a governing body to enact laws to promote the general welfare of the people
Explicit powers
the powers of the United States federal government that are explicitly stated in the Constitution.
Implied powers
powers that a government branch has that are not explicitly stated in the Constitution, but are necessary to carry out other powers that are listed.
Allocation
gov action changes how resources are allocated
Pareto Optimality
The idea that we can only say economically that an idea is good is if it makes at least one person better off and no one worse off is known as:
Interpersonal Utility Comparison
a phenomenon that attempts to compare the satisfaction or utility that is gained by two different individuals when they consume the same commodity.
Social Welfare Function
a mathematical formulation used to gauge the collective or overall welfare of a community based on the utility levels of its individual members.
Normative theories
focuses on the value of economic fairness, or what the economy “should be” or “ought to be.”
Positive theories
based on objective data rather than opinions and value judgments.
Efficiency
is getting the most output for each input.
Equity
the idea that economic resources, wealth, and opportunities should be distributed fairly and justly across a society
Why do economists think that maximizing is rational even if it makes us act in bad ways?
Rational to an economist means you do what is best for you. Economists believe people maximize their utility.
How do we analyze something in a scientific way.
Have to be able to test any hypothesis supported by evidence
How did folks before Adam Smith see the world differently than Smith did? Why did Smith believe in the power of the free market?
Smith believed that there weren’t losers in a trade because they were voluntary
Why is competition essential to Adam Smith’s theory?
Competition gives things value
What are the essential elements of capitalism and socialism? What was Marx’s critique of capitalism? What do modern economists think about socialist economies?
Capitalism- private ownership of capital
market allocation
self interest motives
Socialism-
Marx’s critique was that businesses and workers are inherently at odds in what they want, and that businesses tend to win this fight.
Why do most economists like capitalism? What are the concerns with modern capitalism?
positive incentives
innovation and invention
Capitalism isn’t a static system
creates opportunity
Negatives
Does capitalism naturally create inequality?
Does competition erode naturally over time?
Conflict between workers and
Explain why the production of public goods, according to most economists, will not work if left to the market.
Companies will attempt to do as little as possible to meet demands
What was Adam Smith’s view of government? What other things do modern economists debate whether they should be included in government’s role?
Self-interest, everything people do are for self-interest
