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Econ > Econ unit 1 test > Flashcards

Econ unit 1 test Flashcards

1
Q

Economics

A

the study of how people choose to use their limited resources to satisfy their un- limited wants

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2
Q

economy

A

a system used to manage limited re- sources for the production, distribution, and consumption of goods and services

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3
Q

positive economics

A

The branch of economics that uses objective analysis to find out how the world works. The goal is to describe how things are.

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4
Q

normative economics

A

The branch of economics that applies value judgments to data in order to recommend actions or policies. The goal is to advise how things ought to be done.

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5
Q

scarcity

A

the condition that results because people have limited resources but unlimited wants

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6
Q

tradeoff

A

the exchange of one benefit or advantage for another that is thought to be better

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7
Q

cost-benifit analysis

A

a way to compare the costs of an action with the benefits of that action. if benefits exceed costs, then the action is worth taking.

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8
Q

incentive

A

Any factor that encourages or motivates a person to do something. Prices, taxes, and laws create incentives that influence how people behave.

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9
Q

Economic Enigma

A

puzzles or riddles that might be explained through an economic analysis

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10
Q

Resources

A

anything used to produce an economic good or a service

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11
Q

microeconomics

A

the study of economics at an individual, group, or company level.

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12
Q

Macroeconomics

A

the study of a national economy as a whole.

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13
Q

costs

A

what you spend in money, time, effort, or other sacrifices to get it

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14
Q

Benefits

A

what you gain from something in terms of money, time, experience, or other improvements in your situation

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15
Q

margin

A

the outer edge of something

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16
Q

marginal cost

A

an increase in total costs when you add one unit to something

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17
Q

marginal benefit

A

what you gain by adding one more unit to something

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18
Q

market

A

any arrangement that brings buyers and sellers together to do business with each other

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19
Q

graph

A

a visual representation of the relationship between two given sets of data

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20
Q

variable

A

quantity that can vary, or change

21
Q

economic model

A

a simplified representation of reality that often allows economists to focus on the effects of one change at a time

22
Q

who was Adam smith? what did he write? what did he say?

A

he is a political economist and philosopher. he wrote the book “wealth of nations”. he explains that there should not be any government interference in business. he describes the invisible hand that guides human affairs in order to explain this mystery. there should also be competition for best product and convenience

23
Q

what are the four ways to define economics depending on how economists view their work?

A
  1. analyze everyday enigmas
  2. teaching better decision making
  3. study how people use limited resources to satisfy unlimited wants.
  4. analyze how economics work and making policy recommendations (positive and normative economics)
24
Q

what are the seven principles of economic thinking.

A
  1. scarcity forces tradeoffs: limited resources force people to make choices and face tradeoffs as a result of these choices
  2. costs v benefits: choose something when the benefits of doing so are greater than the costs
  3. thinking at the margin: most decisions we make each day involve choices about a little more or a little less of something rather than making a wholesale change
  4. incentives matter: people respond to incentives in generally predictable way
  5. trade makes people better off: by focusing on what we do well then trading with others, we will end up with more better choices than by trying to do everything for ourselves
    6: markets coordinate trade: markets usually do better than anyone or anything else at coordinating exchanges between buyers and sellers
  6. future consequences count: decision made today have consequences not only for today but also in the future.
25
Q

list and explain the three tools economists use

A
  1. scientific method: posing question, researching the question, developing hypothesis, conducting studies to collect information, and then evaluating the hypothesis.
  2. graphs: used to simplify the complex, three dimensional world we live in
  3. economic model: simplified representation of reality that often allows economists to focus on the effect of one change at a time
26
Q

Goods

A

physical articles that have been produced for sale or use. three examples are food, clothing and cars

27
Q

Services

A

work done by someone else for which a consumer, business, or government is willing to pay

28
Q

factors of production

A

the resources used to produce goods and services. economists define these resources as land, labor, and capital

29
Q

Entrepreneurship

A

the willingness and ability to take the risks involved in starting and managing a business

30
Q

Capital

A

the tools, machine, and buildings used to produce goods and services.

31
Q

opportunity cost

A

the value of the next best alternative that is given up when making a choice. this is the measure of what you must give up when you make a decision

32
Q

production possibilities frontier

A

a simple model of an economy that shows all the combinations of two goods that can be produced with the resources and technology currently available

33
Q

inputs

A

the scarce resources that go into the production process

34
Q

outputs

A

the goods and services produced using these resources

35
Q

perpetual resources

A

resources that are widely available and in no danger of being used up

36
Q

renewable resources

A

resources that can be replenished as they are used

37
Q

nonrenewable resources

A

resources that once they’re used, they are gone forever.

38
Q

financial capital

A

money used to buy the tools and equipment used in production

39
Q

Utility

A

satisfaction or pleasure one gain from consuming a product or service or from taking an action.

40
Q

Marginal Utility

A

the extra satisfaction or pleasure you will get from an increase of one additional unity of a good or service.

41
Q

Negative Utility

A

a lack of pleasure or satisfaction from consuming a product or service or taking an action; the opposite of utility

42
Q

describe the three reasons why we want is scarce?

A
  1. our wants always exceed our resources.
  2. with resources limited, scarcity is everywhere
  3. shortages are temporary, while scarcity is forever
43
Q

explain the four factors of production

A
  1. land: the gift of nature
  2. labor: putting human capital to work
  3. capital: tools, machines, buildings, and money
  4. entrepreneurship: a person who is innovator, strategist, risk taker, and a spark plug
44
Q

name and define the three types of resources.

A
  1. perpetual resources: widely available and in no danger of running out
  2. renewable resources: can be replenished as they are used
  3. nonrenewable resources: once they’re used, they are gone forever
45
Q

name and define the three types of capital.

A
  1. financial capital: money used in business
  2. physical capital/capital goods: concrete productive resources
  3. human capital: the knowledge and skill people gain from education, job training, and experiences
46
Q

explain the relationship between maximizing utility, tradeoffs, and opportunity cost.

A

maximizing utility is the satisfaction one gain from consuming a product
tradeoffs is what we give up when we choose, scarcity, (guns & butter)
opportunity cost is the best thing we give up to get what we want/ second best thing (time vs money)

47
Q

what is the law of diminishing utility?

A

the more you consume of something, the less satisfaction you will get from each additional unit

48
Q

Mankiw’s Ten Principles of Economics

A
  1. People face trade-offs
  2. The cost of something is what you give up to get it
  3. Rational people think at the margin
  4. People respond to incentives
  5. Trade can make everyone better off
  6. Markets are usually a good way to organize economic activity
  7. Governments can sometimes improve market outcomes
  8. A country’s standard of living depends on its ability to produce goods and services
  9. Prices rise when the government prints too much money
  10. Society faces a short-run trade-off between inflation and unemployment

Econ (1 decks)

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