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Econ 201 > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

Define economics

A

the study of how society manages its scarce resources

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2
Q

scarcity

A

the limited nature of society’s resources

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3
Q

Organize economic activity

A

aka “managing scarce resources” and meaning determining :

  • WHAT to produce
  • HOW to produce
  • WHO gets it
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4
Q

3 types of economic systems

A
  1. Traditional economy
  2. command economy
  3. market economy
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5
Q

Traditional Economy

A

make what we already make

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6
Q

Who is the father of economics

A

Adam Smith

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7
Q

Command Economy

A
  • decisions made by small group of people

- they ask WHAT/HOW to produce, and WHO gets it

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8
Q

Wealth of Nations- Invisible Hand

A

The Wealth of Nations,1776 –Households & firms act as if “led by an invisible hand” to promote general economic well-being (decentralized decision-making)

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9
Q

3 Divisions of labor

A

specialization, economies of scale, trade

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10
Q

Markets organize economic activity through______.

A

prices

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11
Q

What is an economic MODEL and what does it do

A

simplified representation

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12
Q

What is an economic ASSUMPTION and what does it do

A

simplifies the complex world

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13
Q

Ceteris Paribus

A

all else held constant

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14
Q

What is the Circular Flow Model (CFM)

A

visual model of the economy, shows how households and firms interact in markets

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15
Q

What 2 types of “actors” are involved in the CFM

A

Households

Firms

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16
Q

What 2 types of MARKETS are involved in the CFM

A
  • Goods and Services

- Factors and Production

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17
Q

What 3 things are involved with Factors and Production

A
  • land
  • labor
  • capital
18
Q

In the CFM, what do households do

A

Households:

  • own factors of production,sell/rent them to firms for income
  • buy and consume G & S
19
Q

In the CFM, what do firms do

A

Firms:

  • buy/hire factors of production used to produce G&S
  • sell G&S
20
Q

What does Microeconomics focus on

A

focuses on individual decision makers

21
Q

What does Macroeconomics focus on

A

study of economy-wide phenomena

22
Q

What are the two roles of an economist

A
  • Scientist

- Policy advisors

23
Q

What does the scientific role of an economist do?

A

tries to EXPLAIN the world through the scientific method

24
Q

What does the policy advisor role of an economist do

A

tries to IMPROVE the world

25
Q

What is a positive statement?

A

describes the world as is

26
Q

What is a normative statement

A

attempt to prescribe how the world should be

27
Q

What is opportunity cost

A
  • whatever must be given up to obtain it

- next BEST alternative

28
Q

Scarcity gives rise to ____ and _____.

A

tradeoffs

decisions

29
Q

What is the Production Possibility Frontier (PPF)

A
  • visual model of scarcity, tradeoffs and efficiency (productive, allocative)
  • shows the combinations of two goods an economy can possibly produce
  • given available resources and technology
30
Q

What two shapes can the PPF take and what do those shapes mean

A
  • linear- if opp. cost is constant

- curved- opp. cost of a good rises as the economy produces more of it

31
Q

What does the slope of the PPF represent

A

opp. cost of 1 good in terms of the other

32
Q

What is absolute advantage

A
  • ability to produce a good using fewer inputs than another producer
33
Q

what is comparative advantage

A
  • ability to produce a good at lower opportunity cost than another producer
34
Q

With regards to supply and demand, what 3 things are involved in markets

A
  • buyers/sellers
  • goods/services
  • voluntary exchange
35
Q

What is a perfectly competitive market

A

nobody has an influence on how the market goes overall

36
Q

Marginal analysis

A

examination of the additional benefits of an activity compared to the additional costs incurred by that same activity

37
Q

What 2 factors are involved with determining Demand

A
  • willingness to buy

- ability to buy

38
Q

What is quantity demanded

A
  • specific quantity at a specific point
39
Q

Law of demand

A

claim that quantity demanded of a good falls when its price rises other thing being equal

40
Q

What factors shift the demand curve

A
  • number of buyers
  • income
  • prices of related goods
  • tastes/preferences

Econ 201 (1 decks)

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