ECONOMICS -Choice in a World of Scarcity. (Chapters 1 and 2) Flashcards
What is economics ?
is the study of how humans make decisions in the face of scarcity.
What does scarcity means?
that humans wants for good, services exceed what is available
What does specialization means?
when workers or firms focus on particular task for which they are well-suited within production process.
What is economies of scale?
as the level of production increases, the
average cost of producing each individual unit declines.
What is Microeconomics?
focuses on the actions of individual agents
within the economy, like households, workers, and businesses.
What is Macroeconomics?
is the branch of economics that focuses on
broad issues such as growth, unemployment, inflation, and trade
balance.
What is Positive economics?
a statement of fact, such as “the
unemployment rate is x%”
What is Normative Economics?
a statement of opinion, such as ‘if we
lower taxes, then the unemployment rate will fall.”
What is Monetary policy?
- policy that involves altering the level of interest
rates, the availability of credit in the economy, and the extent of
borrowing.
What is Fiscal policy?
economic policies that involve government
spending and taxes.
What does the circular flow diagram shows ?
it shows how households and firms interact in the goods and services market, and in the labor market.
What is traditional economy?
- typically an agricultural economy
where things are done the same as they have always been done.
• Oldest economic system
What is a Command economy?
an economy where economic decisions
are passed down from government authority and where the
government owns the resources.
What is a market economy?
an economy where economic decisions are decentralized,
private individuals own resources, and businesses supply
goods and services based on demand.
Buying and selling decisions are made in markets (not by
government).
What is market?
interaction between potential buyers and sellers; a
combination of demand and supply.
What’s an underground market?
where the
buyers and sellers make transactions without the government’s
approval.
What is Globalization?
the trend in which buying and selling in markets
have increasingly crossed national borders. Reasons for
increased globalization:
● Cheaper shipping
What is exports?
the goods and services that a nation produces
domestically and sells abroad.
What is an import?
the goods and services that are produced abroad and
then sold domestically.
What is Gross domestic product?
● Market Value of all Final Goods and Services produced in a
country’s borders.
● Measures the size of total production in an economy.
Define Opportunity cost?
indicates what one must give up to obtain what
he or she desires.
What is the opportunity cost?
The opportunity cost is the value of the next best
alternative.
What is Marginal analysis ?
● Marginal = incremental
● examining the benefits and costs of choosing a little more or
a little less of a good.
What is Utility?
satisfaction, usefulness, or value one obtains from
consuming goods and services.
