Exam 1 Flashcards
What does trade do?
Creates value and increases the wealth created by a society’s resources.
Scarcity
Whenever there is less of a good or resource freely available from nature than people would like.
Factors that cause a “change in demand”:
Changes in consumer income. Changes in the number of consumers in the market. Changes in the price of a related good. Changes in expectations. Demographic changes. Changes in tastes and preferences.
Normative Economics
“What ought to be”
What happens when the demand for a good increases?
It’s price will rise.
Perfectly vertical demand line.
Perfectly inelastic.
Statements that can neither be confirmed not proven false by scientific testing.
Normative
Good intentions don’t necessarily mean…
Good outcomes.
Ceterus paribus
Other things constant
Value is..
Subjective
The benefit or satisfaction that an individual expects from the choice of a specific alternative:
Utility
Positive economics
“What is”
Shift in the entire demand curve:
Change in demand
Movement along the same demand curve.
Change in quantity demanded
Shows max amount of any two products that can be produced from a fixed set of resources, showing possible trade offs between them.
Productions Possibility Curve
Total output will be greatest when the output of each good is produced by the person with the lowest opportunity cost for that good.
Law of Comparative Advantage
Choice
Act of selecting among alternatives.
Statements that involve potentially verifiable or refutable propositions.
Positive
Tools, machines and buildings.
Physical resources
Where is price located?
Y-axis
Where is amount located?
X-axis
Transaction costs:
Time, effort and other resources necessary to conclude an exchange.
Shift of the supply curve.
Change in supply
There is an inverse relationship between the price of a good or service and the quantity of it that consumers are willing to purchase.
The Law of Demand
