LESSON 1 Flashcards
Considered the Founder of modern economic
Adam Smith
Book became the apostle of classical economics
The wealth of nations
Society has limited resources
Scarcity
Study of how people or society manages its scare resources
Economics
Study how people make decision
Economist
Show how dollars flow through the market among household and firms
Circular flow Diagram
Wants to meet his/her satisfaction
Consumer
Also known as satisfaction
Utility
Other things held constant
Cetebis paribus
Own by individual
Free Enterprise economy
The price mechanism
Economic structure
Free economy, Private owner
Capitalism
Government is involved
Commonism
Different states with different laws
Federalism
Firm and household
Feudalism
Provide or sell goods and services
Firms
Main obstacle which economics aims to handle
Scarcity
Value of the best forgone opportunity
Opportunity
Reflected by the production possibilities frontier (PPF)
Product possibilities
Combination of output and available product technology
Production possibilities frontier
Attempt to describe the world as it is.
Positive statement
Attempt to prescribe how the world should be.
Normative statement
Ability to produce a good using few inputs
Absolute advantage
Gains from specialization and trade
Comparative advantage and trade
Gains from specialization and trade, but it raises a couple of related questions
The pride of the trade
Counter clockwise flow
Money flow
