Microecon chapter 1 Flashcards
Issues of Pressing Concern (7)
- COVID-19 pandemic
- Population aging
- Climate change
- Productivity growth and accelerating technological change
- Rising protectionism
- Growing income inequality
- Government debt and priorities
What is economics?
The study of the use of scarce resources to satisfy unlimited human wants
Resources (3)
- Land
- Labour
- Capital
Resources synonym
Factor of production
Goods are…
Tangible
Services are…
Intangible
Production is…
Act of making goods/services
Consumption is…
Act of using goods/services
Scarcity/Choice (3)
- Relative to our desire, existing resources are scarce
- Not enough resources to produce the goods/services that we want
- Scarcity implies the need for choice
Opportunity cost
The value of the next best alternative that is forgone when one alternative is chosen
Points that lie on or inside the budget line are…
Attainable
Points that lie outside the budget line are…
Unattainable
PPB stands for…
Production Possibilities Boundary
PPB illustrates… (3)
- Scarcity
- Choice
- Opportunity cost
Points on the PPB are…
Attainable and efficient
Points inside the PPB are…
Attainable and inefficient
Points outside the PPB are…
Unattainable
Four key economic problem
- What is produced and how?
- What is consumed and by whom?
- What are resources sometimes idle?
- Is productive capacity growing?
Resource allocation
Determines the quantities of various goods that are produced
Idle resources
Resources that are not currently being used
Economic growth for the PPB (3)
- Boundary shifts outwards
- Unattainable points become attainable and efficient
- Previous efficient points become inefficient
What can affect the outcome of the economic problems?
Government policies
GP for production
Correct market failures resulting from misallocation of resources
GP for consumption
Address fairness of distribution of consumption across individuals
GP for idle ressources
Provide solutions to reduce idleness of nation’s resources
GP for productive capacity growth
Promote economic growth
Self-Organizing market economy
When individual consumers and producers act independently to pursue their own self-interests, the collective outcome is coordinated
Efficiency in market economy
Resources are organized so as to produce the various goods and services that people want to purchase and to produce them with the least possible amount of resources
Adam Smith message (2)
- Not motivated by benevolence
- Act in regard to our own interest
Individuals generally pursue…
Their own self-interest
Individuals responds to…
Incentives
Sellers usually want to sell more when prices are…
High
Buyers usually want to buy more when prices are…
Low
Decision makers in any economy (3)
- Consumers
- Producers
- Government
Specialization of labour
Specialization of individual workers in the production of particular goods and services
Division of labour
The breaking up of a production process into a series of specialized tasks
Money (2)
- Eliminate the barter system
- Facilitate trade, which facilitate specialization
Globalization
Increased importance of international trade
Major causes of globalization (2)
- Rapid reduction in transportation costs
- Revolution in information technology
Globalization challenges (3)
- Human rights
- Environmental
- Production standards
Types of economic systems (4)
- Traditional
- Command
- Free-market
- Mixed economy
Governments intervene in economies to… (3)
- Correct market failures
- Provide public goods
- Offset the effect of externalities
Main characteristics of market economies (4)
- Self-Interest
- Incentives
- Market price and quantities
- Institutions
