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Econ2 > Introduction to microeconomics > Flashcards

Introduction to microeconomics Flashcards

1
Q

What is Scarcity

A

A situation that arises because people have unlimited wants in face of limited resources

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2
Q

What are economic goods

A

Goods that are scarce

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3
Q

What are free goods

A

Goods that are not scarce

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4
Q

What is poverty

A

A situation where individuals lack the basic necessities of life

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5
Q

What are needs

A

Things that are essential or human survival

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6
Q

What are wants

A

goods that are not necessary for human survival

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7
Q

Why are choices bad

A

People can make bad decisions

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8
Q

What are firms

A

An organization that creates output

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9
Q

What is a household

A

A person or people that engage in economic activity

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10
Q

What is government

A

The group of MPs that are responsible to develop policy and laws

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11
Q

What is rationality

A

Economic agents acting in their own best interests

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12
Q

What is utility

A

The benefit derived from the consumption of a good or service

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13
Q

What is an incentive

A

Something that motivates someone to do something

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14
Q

What is opportunity cost

A

the cost of the next best alternative

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15
Q

When are incentives most effective

A

When agents are rational and there is lots of information

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16
Q

When are incentives ineffective

A

When agents are irrational
When there is little information
When there is little competition

17
Q

What is a positive statement

A

A statement that uses facts

18
Q

What is a normative statement

A

A statement involving a value judgement

19
Q

What is a value judgement

A

A statement based on opinions or beliefs

20
Q

What is a factor of production

A

Resources used in the production process e.g. land, labour, capital or enterprise

21
Q

What is the reward for land

A

Rent

22
Q

What is the reward for labour

A

Wages/slaries

23
Q

What is the reward for capital

A

Interest

24
Q

What is the reward for enterprise

A

Profit

25
Q

What is resource allocation

A

The way in which a societies productive assets are deployed

26
Q

What is a market economy

A

Where market forces are allowed to guide resource allocation

27
Q

What is a centrally planned economy

A

Where the government guides resource allocation within a society

28
Q

What is a mixed economy

A

Where the government and market work together to allocate resources

29
Q

What is the invisible hand

A

A term used by Adam Smith to describe how resources are allocated within a market economy

30
Q

What is the GDP of a country

A

The value of all the final goods and services produced in a country per year

31
Q

How do incentives affect the decisions made by economic agents

A

By affecting the opportunity cost

32
Q

What is a trade-off

A

A situation in which the choice of one alternative requires the sacrifice of another

33
Q

What does a PPC (Production Possibility Curve) show

A

The maximum combination of goods or services that can be produced in a set period of time given available resources

34
Q

What are capital goods

A

Goods used as part of the production process

35
Q

What are consumer goods

A

Goods produced for consumption

36
Q

What is the basic economic problem

A

How best to allocate scarce resources

37
Q

What is a shift on a curve

A

When the curve changes position

38
Q

What is movement along a curve

A

When a point changes position to a different point on the same curve

39
Q

What is consumer surplus

A

The difference between the amount a consumer pays for an item and the amount they are willing to pay for the item

Econ2 (5 decks)

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