Lecture 1, 2 - Introduction, Use of Models Flashcards
What is a Model?
A simplified representation of a real situation that is used to better understand real-life situations.
What is the Production Possibilities Frontier?
Is a diagram that shows the combination of two goods that are possible for a society to produce at full employment.
(We assume that the country is only producing two goods and everyone i working to produce these two goods.)
What can you use the PPF model to answer?
- How much can we produce?
- What will it cost us to change our mix of production?
- Does it make more sense to import the good from somewhere else.
PPF
All points under the curve are ________ but ___ _________.
All points above the curve are ___ ________.
All points on the curve ___ ________ and _________.
PPF
All points under the curve are feasible but not efficient.
All points above the curve are not feasible.
All points on the curve not feasible and efficient.
What is an opportunity cost?
What must be given up in order to get a good.
Theory of Comparative Advantages
What is this?
It makes sense to produce the things you’re especially good at producing…. and by everything else from others.
What is a country that has a COMPARATIVE ADVANTAGE?
A country has a comparative advantages in producing good which have the lowest opportunity cost.
What is a microeconomics?
Is the branch of economics that studies how people make decisions and how these decisions interact.
When does market failure occur?
It occurs when the individual pursuit of self-interest leads to bad results for society as a whole.
What is Macroeconomics
Is the branch of economics that is concerned with overall ups and downs in the economy.
Double Coincidence of Wants
What is this?
Two people or two parties. The two parties have to gave goods that each other want, they also need to agree on how they might exchange these two goods.
Double Coincidence of Wants
What happens when they can’t decide
It doesn’t work.
What economy does double coincidence?
Barter Economy
What is the Barter Economy?
When you are not using money you are exchanging goods for goods.
