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gr12 1st Sem > Economics Chap 1 > Flashcards

Economics Chap 1 Flashcards

1
Q

Econ from the greek word

A

“Oikonomia” means household
management

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2
Q

-study of how society manages its scarce resources

A

Economics

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3
Q

how individuals within a society generally make choices
that involve the use of scarce resources from among
alternative wants that need to be satisfied

A

Economics

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4
Q

The limited nature of society’s resource
An economic condition wherein there is no enough
resources to satisfy all the demands of the people

A

Scarcity

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5
Q

Importance of Studying Economics

A

Economics affects daily life

Economics helps render more informed decisions

Makes us more effective citizens

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6
Q

BRANCHES OF
ECONOMICS

A

Microeconomics
Macroeconomics

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7
Q

-how households and individuals spend their budgets

A

Microeconomics

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8
Q

-determines the level of economic activity in a society

A

Macroeconomics

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9
Q

-one produces a good or service is divided into a number of tasks
that different workers perform, instead of all the tasks being done
by the same person.

A

Division and Specialization of Labor (Adam Smith’s Wealth of
Nations)

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10
Q

The value of the good or service foregone.

The value of the next best choice that you give up when
you make an economic/rational decision.

A

Opportunity Cost

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11
Q

Costs that we make in the past that we cannot recover.

A

Sunk Cost

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12
Q

people who systematically and purposefully do the
best they can to achieve their objectives given the available
opportunities.

A

Rational People

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13
Q

small incremental adjustments to a plan of
action.

A

Marginal Changes

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14
Q

-typically an agricultural economy where things are done the
same as they have always been done.

A

Traditional Economy

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15
Q
  • economic decisions are passed down from government
    authority and where the government owns the resources.
A

Command Economy

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16
Q
  • an economy where economic decisions are decentralized, private
    individuals own resources, and businesses supply goods and services
    based on demand.
A

Market Economy

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17
Q

Two kinds of decision makers

A

Firms
Households

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18
Q

the ones that produce goods and services using
inputs, such as the factors of production:
Labor, Land, Capital

A

Firms

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19
Q

the ones who own the factors of production
and consume all the goods and services that firms produce

A

Household

20
Q

refers to a visual model of the economy that shows how
money flows through markets among households and firm

A

Circular Flow of Economy Model

21
Q

Two Types of Markets

A
  1. Markets for goods and services
  2. Markets for the factors of production
22
Q
  • households are buyers and firms are
    sellers; households buy the output of goods and services that firms
    produce
A

Markets for goods and services

23
Q

households are sellers and firms
are buyers; household provide firms the inputs that the firms use to
produce goods and services

A

Markets for the factors of Production

24
Q
  • Produce and sell
    goods and services * Hire and use factors of production
A

Firms

25
Q
  • Buy and consume goods and services
  • Own and sell factors of production
A

Households

26
Q
  • Households sell
  • Firms buy
A

Markets for Factors of production

27
Q
  • Firms sell
  • Households buy
A

markets for goods and services

28
Q

The principles of
HOW PEOPLE
MAKE DECISIONS

A

Principle 1 People Face Tradeoffs
Principle 2 The Cost of Something Is What You Give Up to Get It
Principle 3 Rational People Think at the Margin
Principle 4 People Respond to Incentives

29
Q

The principles of
HOW PEOPLE
INTERACT

A

Principle 5 trade can make everyone better off
Principle 6 Markets are usually a good way to organize economic activity
Principle 7 Government can sometimes improve market outcomes

30
Q

The principle of how the economy as a whole

A

Principle 8 A country’s standard of living depends on its capability to produce goods and services
Principle 9 Prices rise when the government prints too much money
Principle 10 Society faces a short run trade offf between inflation and unemployment

31
Q

All decisions involve tradeoffs.

A

PRINCIPLE 1
People Face Tradeoffs

32
Q

Making decisions requires comparing the costs
and benefits of alternative choices.

The opportunity cost of any item is
whatever must be given up to obtain it.

It is the relevant cost for decision making.

A

PRINCIPLE 2
The Cost of Something Is
What You Give Up to Get It

33
Q

make decisions by evaluating costs and benefits
of marginal changes, incremental adjustments
to an existing plan.

A

PRINCIPLE 3
Rational People Think at the Margin

34
Q

something that induces a person to
act, i.e. the prospect of a reward or punishment.

A

Incentive

35
Q

Rational people respond to incentives.
something that induces a person to act, i.e. the prospect of a reward or punishment.

A

PRINCIPLE 4
People Respond to Incentives

36
Q

Rather than being self-sufficient,
people can specialize in producing one good or
service and exchange it for other goods.

Countries also benefit from trade and
specialization:

Get a better price abroad for goods they
produce
Buy other goods more cheaply from abroad
than could be produced at home

A

Principle 5 Trade can make everyone better off

37
Q

a group of buyers and sellers
(need not be in a single location)

A

Market

38
Q

“Organize economic activity” means determining

what goods to produce

how to produce them

how much of each to produce

who gets them

A

PRINCIPLE 6
Markets Are Usually A Good Way to
Organize Economic Activity

39
Q

allocates resources through
the decentralized decisions of many households
and firms as they interact in markets.

A

Market economy

40
Q

A market economy allocates resources through
the decentralized decisions of many households
and firms as they interact in markets.

Famous insight by Adam Smith in
The Wealth of Nations (1776):

Each of these households and firms
acts as if “led by an invisible hand”
to promote general economic well-being.

A

PRINCIPLE 6
Markets Are Usually A Good Way to
Organize Economic Activity

41
Q

Important role for govt:

A

Enforce property rights

42
Q

People are less inclined to work, produce, invest, or purchase if large risk of their property being stolen.
Govt may alter market outcome to
promote equity.

A

PRINCIPLE 7
Governments Can Sometimes
Improve Market Outcomes

43
Q

Huge variation in living standards across
countries and over time:

Average income in rich countries is more than
ten times average income in poor countries.

The U.S. standard of living today is about
eight times larger than 100 years ago.

A

Principle 8: A Country’s Standard of Living Depends on Its Ability to Produce Goods & Services

44
Q

the amount of goods
and services produced per unit of labor.

A

Productivity

45
Q

In the long run, inflation is almost always caused
by excessive growth in the quantity of money,
which causes the value of money to fall.

The faster the govt creates money,
the greater the inflation rate.

A

PRINCIPLE 9
Prices Rise When the Government Prints
Too Much Money

46
Q

In the short-run (1–2 years),
many economic policies push inflation and
unemployment in opposite directions.

Other factors can make this tradeoff more or less
favorable, but the tradeoff is always present.

A

PRINCIPLE 10
Society Faces a Short-run Tradeoff Between
Inflation and Unemployment

47
Q

10 Principles of econ

A

PRINCIPLE 1: PEOPLE FACE TRADE-OFFS
PRINCIPLE 2: THE COST OF SOMETHING IS
WHAT YOU GIVE UP TO GET IT
PRINCIPLE 3: RATIONAL PEOPLE THINK AT THE
MARGIN
PRINCIPLE 4: PEOPLE RESPOND TO INCENTIVES
PRINCIPLE 5: TRADE CAN MAKE EVERYONE BETTER OFF
PRINCIPLE 6: MARKETS ARE USUALLY A GOOD WAY TO
ORGANIZE ECONOMIC ACTIVITY
PRINCIPLE 7: GOVERNMENTS CAN SOMETIMES IMPROVE
MARKET OUTCOMES
PRINCIPLE 8: A COUNTRY’S STANDARD OF LIVING DEPENDS ON
ITS ABILITY TO PRODUCE GOODS AND SERVICES
PRINCIPLE 9: PRICES RISE WHEN THE GOVERNMENT PRINTS TOO
MUCH MONEY
PRINCIPLE 10: SOCIETY FACES A SHORT-RUN TRADE-OFF
BETWEEN INFLATION AND UNEMPLOYMENT

gr12 1st Sem (16 decks)

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