Final Review Flashcards
The Economic Problem
Unlimited Wants
Scarce Resources -
Land, Labour, Capital
Resource Use
Choices
What questions does economics propose?
What goods and services should an economy produce?
How should goods and services be produced?
Who should get the goods and services produced?
Opportunity Cost
What you have to give up to buy what you want in terms of goods or services
—–Helps us view the true cost of decision-making
—–Implies valuing different choices based on personal circumstances
Production Possibility Frontiers
Show the different combinations of goods and services that can be produced with a given amount of resources.
No “ideal” point on the curve.
Any point inside the curve - suggests resources are not being utilized efficiently.
Any point outside the curve - not attainable with the current level of resources.
Useful to demonstrate economic growth and opportunity cost.
Laws of the PPF
There is a finite maximum production capacity for all things.
Points within the PPF are possible, but not efficient.
Points outside of the PPF are impossible.
Points on the PPF are possible and efficient.
When moving between points on the PPF, to increase the production of one good, you must decrease the production of another good so that resources are reallocated.
Marginal Benefit
The maximum amount that a consumer is willing to pay for an additional good or service.
—-The marginal benefit decreases as the person consumes more and more of the item.
Marginal Cost
The change in total production cost that comes from making or producing one additional unit.
Garrett Hardin: Economist
Authored essay in 1968 titled The Tragedy of the Commons.
Explored the following issues:
Environmental degradation
Population growth
Limited natural
resources
Privatization of land and other public
resources
Pollution
What does ‘commons’ mean?
“Held in common” means the resource is owned by:
—–Taxpayers and not an individual or corporation
—–All who have access to the resource hold it in common ownership
Tragedy of the Commons
failure to preserve the natural resource for short-term gain and self-interest is known as “the tragedy of the commons.”
ie: more cows in a pasture mean more money for farmer. So each farmer puts another cow on the pasture, but then there are too many cows and they all die.
Sustainability
Meeting present needs without compromising the needs of future generations.
3 pillars of sustainability are SEE (social, environmental, and economic needs).
Use resources at a rate lower than the rate at which they are replenished.
Examples of current tragedy of the commons
Air pollution (adding GHG and smog to the air)
Water pollution (nitrogen, phosphorus, pesticides, heavy metals and so on)
Uncontrolled human population growth leading to overpopulation
Deforestation for agriculture/Habitat disruption and fragmentation
Price Speculation
Predicting future prices of goods in the market
Speculators do what they hope will make them a profit (buy/sell certain goods)
Hoarding
Keeping all materials/resources/capital for yourself/company
Costs and Benefits of Government Spending Programs
Some occasions where spending is more than benefits that Congress will pass.
