Intro to Economics Flashcards
Define economics
It is the study of how individuals and societies choose to use scarce resources that nature and previous generations have provided to satisfy unlimited wants.
Define opportunity cost.
It is the best alternative which is forgone when a decision is made.
Define marginalism.
It is the process of analyzing additional costs or benefits that arise from a choice.
Do firms consider marginal or sunk costs when making a decision?
Marginal. Sunk costs are costs which have already been borne.
What is an efficient market?
An efficient market is a market where profit opportunities are eliminated almost instantly.
How does flow of information effect market efficiency?
A quicker flow of information makes markets more efficient.
What was the Industrial Revolution?
It was a period of time in England during the late 18th and early 19th centuries which saw an increase in manufacturing technologies and improved transportation which gave rise to the modern factory system, and a movement of the population from the countryside to cities.
Define microeconomics.
It is the branch of economics which examines the behaviour of individual decision making units (households and firms).
Define macroeconomics.
It is the branch of economics that examines the behaviour of economic aggregates on a national level.
Is minimum wage a macro or microeconomic concern?
Microeconomic.
Is total unemployment a macro or microeconomic concern?
Macroeconomic.
What criteria are used to judge economic policy?
- Efficiency
- Equity (fairness)
- Economic growth
- Economic stability
What does “ceretis paribus” mean? What is it used for?
It is Latin for “all else equal”. It is used when analyzing the relationship between two variables.
What is a model?
A model is a formal statement of a theory. They describe the relationship between two or more variables.
What is an efficient economy?
An efficient economy is one that produces what people want at the lowest possible cost.
What can cause an economy to be inefficient?
Bad laws, unemployment, etc.
Define equity.
Equity is the quality of being fair. It is subjective.
What is economic growth?
Economic growth is an increase in total economic output.
What are the main sources of economic growth?
Technological advances and increases in capital.
What is economic stability?
Economic stability is the condition in which national output is steadily growing, while inflation is low and resources are being fully employed.
Do normative economics make value judgements?
Yes.
Do positive economics make value judgements?
No.
What is positive economics?
Positive economics is the part of economics that focuses on describing what exists and how it works.
What is another name for policy economics?
Normative economics.
What is normative economics?
Normative economics is a part of economics that examines the outcomes of economic behaviour and judges them as good or bad, and if they can be improved.
