Foundations of Economics Flashcards
What are economics?
the social science that studies how scarce resources are allocated to fulfill the infinite wants of consumers
What is an economic good?
any good or service that has a price and is rationed
What is opportunity cost?
what you give up in order to get something else
What are the four factors of production?
- Labor
- Capital
- Land
- Entrepeneurship
What is utility?
the measure of how much usefulness or pleasure a consumer receives when they consume a product
What is total and marginal utility?
- Total utility: the total satisfaction gained from consuming a certain quantity of a product
- Marginal utility: the extra utility gained from consuming one more unity of a product
What are microeconomics?
the branch that deals with smaller, discrete agents and their reactions to changing events
What are macroeconomics?
the branch that measures all the economic activity in the economy, inflation, unemployment, and the distribution of income
What are positive economics?
deals with areas of the subject that are capable of being proven to be correct or not
What are normative economics?
deals with areas of the subject that are open to personal opinion and belief
What is ceteris paribus?
“all the other factors being equal”
What is a planned economy?
Economy where decisions as to what to produce, how to produce, and who to produce for, are made by the government
What is a free market economy?
Economy where all production is in private hands and demand and supply are left free to set wages and prices in the economy. Everyone produces and consumes what they like
What is the national income?
the value of all the goods and services produced in an economy in a given time period, normally one year
What is the GDP?
Gross Domestic Product
