Extra Credit Flashcards
Economics is?
The study of rational choice under conditions of scarcity
Opportunity cost is?
The best alternative that you give up when you make a choice
Scarcity is?
An imbalance between what people want and what is freely available
What are two examples of something that is scarce?
Air, space
What is an example of something that is not scarce?
Garbage
What is rational choice?
Means people making calculated, self-interested choices after weighing the cost and benefits of those choices.
A rational agent choose the action that is..?
Most self-satisfying
Do all choices come with a cost?
Yes
Opportunity cost?
The next best alternative to that you gave up to make the choice you did
Is economics about money?
No
Can economics predict things?
Yes
What is something that can be represented in an economic model?
War
How do economist use the scientific method?
By asking questions, producing explanations, and forming hypotheses
What fields do economist operate in?
Business, government, and academia
What questions do economist ask?
What to produce? How to produce? Who will get it?
After creating a hypothesis what do economist do?
Test it by collecting data
If the data an economist gathers matches the predictions of the hypothesis then?
The economist have explained a condition in the real world.
What do economist in business do?
Help make forecasts about when to launch new products.
What do government economist do?
Collect data, conduct research
What do academic economist do?
Teach, conduct research, and publish findings
What question does positive economics seek to answer?
How will the world work
What question does normative economics ask?
How should the world work
What type of economics is predictive?
Positive economics
What type of economics is judgmental?
Normative economics
Microeconomics
The study of the decisions-making process of individuals
Macroeconomics
The study of aggregate decision making
Players in the economy?
Households, businesses, government, and foreign trade
Nominal variables
Measured in terms of actual dollars
Real variables
Measured in terms of physical goods and services
Example of a question microeconomics ask
If wages rise, will households supply more or less labor?
Example of a question macroeconomics ask
What happens to employment when overall productivity increases?
Which type of economics examines the actions of the federal reserve?
Macro
How does micro and macro analyze households?
Micro - Individual purchasing decisions Macro - Aggregate consumption savings
How does Micro and Macro analyze businesses?
Micro - ratio of labor to capitol Macro - Businesses spending
How does Micro and Macro analyze government?
Micro - tax rates influence individuals purchasing decisions Macro - Stimulates or deters economy
How does Micro and Macro analyze net imports?
Micro - N/A Macro - foreign demand influences production
Scatter diagram
A collection of points on a graph showing the observed relationship between two variables
Direct relationship
Indicates that the two variables move in the same direction
Positive slope on a scatter diagram
Indicates a direct relationship between the variables
How many dimensions is a graph?
A graph is two dimensional
What is an example of a graph?
Pie chart, bar graph
How many variables does a graph usually represent?
Two variables
What is consumption?
The amount of money that a household spends on goods and services
What is income?
The money that a household takes in from work and other sources
General relationship
The relationship between points on a graph
X-axis
Horizontal axis on a graph
Y-axis
Vertical axis on a graph
How many axis’s are on a graph?
Two
Linear relationship
A relationship between two variables that creates a straight line when graphed
Formula for a linear relationship
Y = a + b(x)
Rise over run
The change in the y axis variable divided by the change in the x axis variable
Demand curve
The relationship between the price of a good and the quantity a consumer wants to buy at each price
Do the increments of numbers have to be the same on each axis in a graph?
No, because they represent different things
What is the formula for any straight line?
y = a + b(x)
When writing out the location of a point on a graph i.e. (#,#) does the x or y axis come first?
A-axis
Do demand curves have formulas?
Yes
In the linear line formula what does B represent?
The slope of the line
In the linear line formula what does Y represent?
A variable that is being measured on the Y axis
In the linear line formula what does the letter X represent?
The variable that is being measured on the X axis
What does Delta (triangle symbol) represent in economics?
Change or change in
