Intro to Eco Terms Flashcards
What is economics
Deals with the effectiveness and efficiency in managing our resources
Are resources just money? If not what can they be
No, they can range from money to time, land, labour and Human Resources and physical capital
What is Microeconomics
The study of choices individuals and businesses make in a market and how their interactions are influenced by governments
What is macroeconomics
The study of the total effect on the national and global economy caused by businesses, individuals and government actors,
Why is choice a tradeoff
Trade one thing to keep the other because we have scarcity
What is cost in an economics sense
Cost is what you must give up
What is Opportunity cost
The best thing you give up to get another
Formula for OC
OC= what you give up/what you get
What is the point of OC
When you calculate explicit and implicit costs you gain a full view of the cost and therefore can compare OC’s to decide what to give up
How is benefit measured
It is the gain or the pleasure it brings. It is measured by what you are willing to give up
What is marginal cost
The opportunity cost of a one-unit increase in an activity/ what you give up to gain one more unit
Marginal benifit
What you get when you gain one more unit
What PPF
The boundary between the combinations of goods that can be produced and cannot be produced based on other factors (graph of OC and benefits that measure efficiency and effectiveness)
What are the limits of the PPF
Can produce anything on the inside of the line, cannot produce anything outside it
How do we differentiate between efficiency and effectiveness on the PPF line
Anything inside the curve is effective, anything on the curve line if efficient
Difference between tradeoff and free lunch
A trade off is when production is one the PPF, a free lunch is when it is under the curve
What is a free lunch
A gift, getting something without giving up something else
Absolute advantage
When a person is more productive and can produce using less resources
Comparative advantage
Has a comparative advantage in an activity they can perform at a lower opportunity cost than anyone else
Difference between absolute advantage and comparative advantage
Absolute about comparing productivity whilst comparative is about comparing possibilities
What is OC formed of
The total of explicit plus implicit costs
