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Economics > Microeconomics > Flashcards

Microeconomics Flashcards

1
Q

Economics

A

the study of human efforts to satisfy what appear to be unlimited and competing wants through the careful use of relatively scarce resources

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2
Q

scarcity

A

we have unlimited wants but limited resources

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3
Q

economics is the study of _____.

A

choices

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4
Q

microeconomics

A

study of small economic units such as individuals, firms, and industries

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5
Q

macroeconomics

A

study of the large economy as a whole or economic aggregates

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6
Q

theoretical economics

A

use of the scientific method to make generalizations and abstractions to develop theories

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7
Q

policy economics

A

theories applied to fix problems or meet economic goals

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8
Q

positive statements

A

based on facts. avoids value judgments. (what is)

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9
Q

normative statements

A

includes value judgments. (what ought to be)

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10
Q

5 key economic assumptions

A
  1. society has unlimited wants and limited resources (scarcity)
  2. due to scarcity, choices must be made. Every choice has a cost. (trade offs)
  3. everyone’s goals are to make choices that maximize their satisfaction. (self interest)
  4. everyone makes decisions by weighing the marginal cost and marginal benefits of every choice.
  5. real life situations can be explained and analyzed through simplified models and graphs.
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11
Q

marginal analysis

A

making decisions based on increments

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12
Q

trade-offs

A

all alternatives we give up when we make a choice.

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13
Q

opportunity cost

A

most desirable alternative we give up when we make a choice

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14
Q

utility

A

satisfaction

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15
Q

marginal

A

additional

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16
Q

allocate

A

distribute

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17
Q

price

A

amount buyer pays

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18
Q

cost

A

amount seller pays to produce a good

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19
Q

investment

A

money spent by businesses to improve their production

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20
Q

consumer goods

A

created for direct consumption

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21
Q

capital goods

A

created for indirect consumption

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22
Q

four factors of production

A
  1. land
  2. labor
  3. capital
  4. entrepreneurship
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23
Q

profit=

A

revenue-costs

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24
Q

economic system

A

the method used by a society to produce and distribute goods and services

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25
Q

three economic questions

A
  1. goods and services should be produced?
  2. how should these goods and services be produced?
  3. who consumes these goods and services?
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26
Q

three types of economic systems

A
  1. centrally planned (command) economy
  2. free market economy
  3. mixed economy
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27
Q

centrally planned economy

A

communism

  1. the government owns all resources
  2. the government answers all three economic questions
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28
Q

why do centrally planned economies face problems of poor-quality goods, shortages, and unhappy citizens?

A

little incentive to work harder and central planners have a hard time predicting preferences

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29
Q

Explain why economists say there is no such thing as a “free” lunch.

A

Someone has to pay for the production or service, so you may get an item or service free, but someone has to pay for it.

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30
Q

The cause of scarcity

A

The wants are unlimited but the resources are limited. It is not a scarcity of money but a lack of resources.

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31
Q

Why is economics a social science?

A

it deals with the behavior of people as they cope with the fundamental scarcity.

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32
Q

need

A

a basic requirement for survival

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33
Q

want

A

means of expressing a need

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34
Q

land

A

gifts of nature or nature resources

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35
Q

capital

A

tools, equipment, factories

financial capital- money used in production

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36
Q

labor

A

people with all their efforts, abilities, and skills

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37
Q

entrepreneur

A

a risk taker in search of profits who combines the resources of land, labor, and capital to produce new products

38
Q

production

A

process of creating goods and services with the combined uses of capital, entrepreneurship, labor, and land

39
Q

Gross Domestic Product

A

dollar value of all final goods, services, and structures produced in one year with labor and property supplied by residents. The largest measure of a nation’s income

40
Q

identify the economic concept illustrated by the production possibilities frontier

A

opportunity cost. when resources are fully used, a country can produce anywhere along its production frontier. when all resources are not fully used, the country cannot reach its potential

41
Q

Production Possibilities frontier

A

diagram representing combinations of goods and services an economy can produce when all resources are used

42
Q

cost-benefit analysis

A

a way of thinking that compares the costs of an action to its benefits

43
Q

free enterprise economy

A

an economic system in which consumers and businesses rather than the government jointly make the majority or the economic decisions

44
Q

standard of living

A

the quality of life based on the possession of luxuries and necessities that make life easier

45
Q

distinguish between free products and economic products

A

free product- plentiful and has neither owner nor price (air, sunshine)
economic product- a good or service that is relatively scarce and transferable to others

46
Q

why are services excluded when the wealth of a nation is measured?

A

services are intangible but wealth is not

47
Q

why is productivity important

A

In a world of relatively scarce resources, productivity is a key issue. Economies benefit when productivity increases.

48
Q

distinguish between product markets and factor markets

A

individuals earn their income in factor markets and spend their income in product markets

49
Q

why is economic education important?

A

helps people become better decision makers and it helps us understand the political and social issues operating around us

50
Q

economic product

A

goods and services that are useful, relatively scarce and transferable to others. these command a price

51
Q

good

A

a tangible commodity like a book or car

52
Q

consumer good

A

intended for final use by individuals

53
Q

capital good

A

a manufactured good used to produce other goods

54
Q

service

A

work that is performed for someone. cannot be touched

55
Q

value

A

something that has worth that can be expressed in dollars and cents

56
Q

paradox of value

A

the apparent contradiction between the high value of non-essentials and the low value of essentials

57
Q

utility

A

the capacity to be useful to someone

58
Q

wealth

A

the sum of those economic products that are tangible, scarce, useful, and transferable from one person to another

59
Q

market

A

a location that allows buyers and sellers to deal readily in a certain economic product

60
Q

factor market

A

markets where productive resources are bought and sold (earn)

61
Q

product market

A

markets where producers offer goods and services for sale (spend)

62
Q

productivity

A

efficient use of productive resources

63
Q

division of labor

A

specialization when workers perform fewer tasks more frequently; same as specialization

64
Q

human capital

A

the sum of skills, abilities, health, and motivation of people

65
Q

economic interdependence

A

the action of one part of the world or country have an impact on what happens elsewhere

66
Q

main strengths and weaknesses of a traditional economy

A

strengths- everyone knows what role they play, life is stable, predictable, and continuous
weaknesses- new ways of doing things are discouraged which leads to lack of progress and lower standard of living

67
Q

5 major weaknesses of the command economy

A
  1. not designed to meet the needs/wants of people, rather for the state
  2. lacks incentives for hard work
  3. requires a large, decision making bureaucracy
  4. not flexible to deal with day-to-day problems
  5. people with new ideas find it difficult to get ahead
68
Q

Explain how consumers influence a market economy

A

people’s decisions act as votes for a product. More votes show producers what goods and services to offer. producers are always looking for goods and services that people will buy, so consumers influence production

69
Q

describe how a market economy, traditional economy, and a command economy adapt to change

A

traditional economies don’t change much because new ways of doing things are discouraged which leads to lack of progress and lower standard of living. command economies can change relatively swiftly. market economies take a longer time to adapt to change

70
Q

economy

A

an organized way of providing for the wants and needs of people in a society

71
Q

traditional economy

A

allocation of scarce resources and almost all other economic activity stems from ritual, habit, and custom

72
Q

command economy

A

a central authority makes the most of the WHAT, HOW, and FOR WHOM decisions

73
Q

market economy

A

people and firms act in their own best interests to answer the WHAT, HOW, and FOR WHOM questions. Buyers and sellers exchange goods and services in a marketplace

74
Q

7 major economic goals that Americans agree on

A
  1. freedom to make decisions
  2. efficiency
  3. equity of opportunities
  4. security
  5. full employment
  6. price stability
  7. growth
75
Q

objective of social security

A

a federal program that provides disability and retirement benefits that covers most working people

76
Q

explain how any two of the 7 major economic goals might conflict

A

increase in minimum wage may increase economic equity, but that may raise unemployment and restrict employer’s freedom to pay fair wages

77
Q

explain the importance of setting economic goals

A

resources can be efficiently and effectively used to solve the problem of scarcity while meeting needs and wants. economic goals serve as benchmarks that help people determine which economic system meets their needs

78
Q

inflation

A

an income that does not increase even though prices rise

79
Q

fixed income

A

an income that does not increase even though prices go up

80
Q

state how people and businesses benefit from economic freedom

A

allows people to choose their job, employer, and uses for their money. it allows businesses to choose where and how they produce. it is one of the cornerstones of american society

81
Q

importance of an entrepreneur in a free enterprise economy

A

they organize and manage the other 3 factors of production- land, labor, and capital in order to seek profit. take risks to start new businesses which create new products, greater competition, more production, higher quality, and lower prices

82
Q

how does the government act as a protector, provider and consumer, regulator, and promoter of national goals

A

protector-enacts and enforces laws that make products safe, accurately advertised, and have a low environmental impact
provider/consumer-supplies defense supplies and consumes products to run the nation
regulator- oversees interstate and international commerce, communications, energy, and banking
promoter- carries out the will of the people to carry out their goals

83
Q

capitalism

A

system in which private citizens own the factors of production

84
Q

competition

A

the struggle among sellers to attract consumers while lowering costs

85
Q

voluntary exchange

A

the act of buyers and sellers freely and willingly engaging in market transactions. both buyers and sellers get something they believe has more value than the money or products given up

86
Q

private property

A

people have the right and privilege to control their possessions as they wish which gives people incentives to work, save, and invest

87
Q

profit

A

the extent to which persons or organizations are better off at the end of the period than the beginning

88
Q

profit motive

A

people are free to risk their savings or any part of their wealth in a business venture

89
Q

consumer sovereignty

A

the buyer rules the maket

90
Q

mixed economy

A

free enterprise market economy where people carry on their economic affairs freely, but are subject to some government intervention and regulation

91
Q

modified private enterprise economy

A

same as mixed economy

Economics (4 decks)

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