Intro to Economics Flashcards
Opportunity Cost
Every time you make a choice, you give up the second best option
e.g. - Studying instead of watching Netflix
Positive Statement
Can be refuted; can be a hypothesis; is objective;
e.g. - “I predict unemployment will be 5% next year”
Normative Statement
Cannot be refuted; is an opinion; it states that something is good, bad, too high, or too low; is subjective
e.g. - “Next year unemployment will be too high”
PPC Graph
Production Possibility Curve or PPF (Frontier): Represents all combinations of the maximum amounts of two goods that can be produced by a nation given its resources and technology (if it is using 100% of its resources at 100% efficiency)
Choices of production
If you want to produce more of one good, you have to sacrifice some production of another good
Scarcity
Finite/insufficient amount of resources
e.g. - Not enough timber for new scaling of wood plank factory
Point in the Middle of the Graph
of the PPC
Realistic production
Point Outside the Graph
of the PPC
Scarce resources
Point on the Line
of the PPC
Max efficiency
Point at a corner on the Line
of the PPC
Overspecialization
Definition of Economics
The allocation of scarce resources to fulfill unlimited needs and wants
The Three Basic Economic Questions
What to produce, how to produce, and for whom to produce
Purchasing Power
How easy it is to buy things
The Invisible Hand
The concept on how no one controls a free-market economy
Division of Labor
Dividing labor into its core procedures is more efficient than individual production
Specialization
One must produce whatever it is more efficient to produce
Sunk Cost
If you spend money, nothing you do will make it come back
Economy Types in Crescent Order
Agricultural, manufacturing, and service-based
Capitalism
Economic system in which private actors own and control property in accord with their interests, and demand and supply freely set prices in markets in a way that can serve the best interests of society.
