econ first quiz Flashcards
economics
the science that deals with the production, distribution, and consumption of goods and services, or the material welfare of humankind
the study of how people choose to use their limited resources to satisfy their unlimited wants
macroeconomics
studies national income
analyzes total employment in economy
deals with aggregate decisions
studies overall price level
analyzes aggregate demand and aggregate supply
performance, structure, behavior,
microeconomics
studies individual income
analyzes supply and demand of labor
studies individual prices
scarcity
the natural phenomenon arising from the fact that all the world’s resources are physically limited in quantity
means we have to make choices (trade offs and opportunity cost
tradeoff
the exchange of one benefit or advantage for another that is thought to be better
opportunity cost
the value of the next best alternative to any decision you make
production possibilities curvbe
represents all the different combinations of two goods that can be produced
inside curve is inefficient outside curve is impossible and on the curve is efficient
adam smith
wealth of nations
division of labor competition mercantilism free trade
capitalist
division of labor : adam smith
inscreases productivity
competition ；adam smith
acts as the invisible hand that guides resources to their most productive uses
mercantilism ；adam smith
stifles economic growth
free trade : adam smith
increases economic growth
mercantilism
focused on building a nation’s strength
government controlled trade
aims to increase net exports to create wealth, often through colonization
capitalism
focused on earning profits
free trade
aims to increase productivity to create wealth
laissez-faire
let do let it be
a doctrine opposing governmental interference in economic affairs beyond the minimum necessary to maintain peace and property rights
comparative advantage
if countries specialize in producing goods where they have a lower opportunity cost, then there will be an increase in economic welfare
voluntary exchange
a trade that occurs when both people believe they will benefit from the trade
an increase in wealth fro all parties
trade
voluntary exchange of goods and services
people must be willing to bear a cost
incentives
something that incites an action or greater effort
protectionism
shielding a country’s domestic industries from foreign competition by taxing imports
equity efficiency tradeoff
equity-efficiency tradeoff occurs when maximizing the productive efficiency of the market leads to less equitable wealth distribution.
positive economics
focuses on understanding and describing economic phenomena in a factual manner
verifiable data
normative economics
focuses on offering value based solutions to economic issues
how things should or sholmd’t be
thinking at the margin
to think about your next step forward
rational decision making
what question was Adam Smith seeking to answer when he wrote The Wealth of Nations
why are some countries wealthier than others
why is it important to trade ecen when a country has an absolute advantage
why do most economists oppose protectionalism
trade wars can occur and prohibit more trade from occurring
if this happens the supply and demand chain is broken
5 key economic principels
resources are limited (scarcity)
people must choose (trade-offs)
choices involve costs (opportunity cost)
voluntary exchange creates value (trade = value)
people typically seek their own self-interest (incentives)
