Exam 1 Flashcards
name the 5 reasons we study the economy
- be participant in Information revolution
2.Informed voter
3.understand society and what shapes us
4.understand global affairs
5.learn way of thinking
what’s scientific method
using hypothesis and observations to find cause and effect
what is generalizations
tendencies of a consumer, buyer or market
other-things-equal
factors don’t change others than those being considered
what’s ockahms razor
cut out irrelevant info
post hoc fallacy
after this, therefor this
fallacy of composition
what’s true for one is true for the group
what are the 3 economic ideas
1.people are rational (self-interest)
2. respond to economic incentives
3.optimal decisions made at the margin
what is marginal analysis
decisions based on comparing marginal cost to marginal benefit
what are the 3 questions
1.What goods or serviced produced?
2.how will it be produced
3.who will receive
what is a centrally planned economy?
socialism and communism, when gouv makes decisions
father of communism?
Karl Marx
what is a market economy?
capitalism
describe capitalism?
private property, self-interest, freedom of choice, competition between firms
father of capitalism?
Adam Smith
what is pure competition
many firms, no control on price but the same price, ease of entry
what is a oligopoly?
2-3 firms and hard entry
what is oligopsony?
few buyers
what are the 4 scarce resources and how they get paid?
1.land (rent)
2.labour (wages+salary)
3.capital (interest)
4.entrepreneurial ability (profit)
what are the 4 assumptions for the possibility model?
- full employment
2.fixed resources - fixed technology
- 2 goods, 1 consumer 1 capital
what is productive efficiency
point on the curve
what’s is allocative efficiency
the one special point that maximizes efficiency
what are the 3 ways fro economic growth
- increase resources quality
2.increase resources quantity - technology advancements
