intro stuff Flashcards
what is opportunity cost
it is the cost of what is lost divided by what is gained. definition is the measured cost of of engaging in a activity
what is neo classical economics
it is the approach that supply and demand drive the market
what are firms and consumers motivated by
greed and wanting the most out things (maximizing)
who maximizes
everyone
how do you find profit
the amount the product is sold for (revenue) subtracted by the cost for the producer
what is value
the max amount you are willing to give up of another good for the good good in question ( kind of like opportunity cost)
what is cost
the direct amount you payed for the good ( how much you have to give up for the good
what does specialization cause
it creates a maximum productivity by creating a large amount of people good at one thing that can trade with each other
real world example
soccer goalies train to be good at blocking balls with their hands while strikers train to get good at scoring they are both specialized in their own field
what does specialization and scarcity create
value
what is scarcity
states that we have a finite amount of goods and resources but our greed is infinite
what is economics
the study of how we as a society utilize finite recourses to satisfy our never ending greed
scarcity and choice relation ship
because we have a limited amount of recourses we have to chose between what we want and what we have to give up
thinking on the margin
marginal means for one extra unit
marginal cost
the cost of producing one more unit
marginal revenue
the additional revenue of selling one more unit
how to calculate marginal cost
change in average cost lets say you make 50 pizzas for 200 dollars at a average cost per pizza is 4 dollars but when you make 51 pizzas it costs you 205 dollars to make the pizza that means the marginal cost for the one pizza is 5 dollars
demising marginal value
the more you buy of a good the cheaper it becomes
demising marginal value
the more you buy of a good the cheaper it becomes and the more you buy a good the less you are willing to buy of that good
rules of optimization
if the value of a good exceeds the cost buy it and if the marginal value of the good is less then the expense get one more
what is time preference
people value having things now and discount the future
why do people discount the future
because the future is uncertain but a dollar today is a dollar
what is the ppf curve
its a curve that shows the what the maximum production possibility
what is a command economy
a central authority tells people what to do how much to sell at what price etc
free market economy
the consumers and producers dictate the market
traditional economy
the economy of 3rd world
traditional economy
the economy of 3rd world mostly functions on customs and habits
