Module 1 Flashcards
scarcity
occurs when there aren’t enough resources to satisfy everyone’s desires
7 big ideas; trade offs are everywhere
to get something we want, we might have to choose it over something else
7 big ideas; true cost of something is its opportunity cost
when we choose a certain path, we lost another opportunity to do something else
7 big ideas; deciding how much is best accomplished by thinking on the margin
looking at benefits and cost of choosing a little more or a little less
7 big ideas; people usually respond to incentives
incentives are motivating factors for people to do certain actions
7 big ideas; trade can make everyone better off
trade creates an efficient environment of mutual benefit
7 big ideas; markets are a good way to organize econ activity
collection of buyers and sellers and is organized by decentralized decisions by people
invisible hand
market is able to regulate itself when business and sellers focus on their own benefits
7 big ideas; gov can help when markets don’t work
gov can place incentives and force people to do better so everyone’s needs are met
production possibilities frontier (PFP)
model that graphs the max number of an economy can produce with their resources available
exporting
sell goods it produces domestically to other countries
importing
country sells goods domestically that are produced abroad
absolute advantage
production of goods and services using less inputs – efficient at making
comparative advantage
production of goods and services at a lower opportunity cost than another producer. trade will be mutually beneficial if the parties produce the good they have comparative advantage in
opportunity cost
what we give up/lose when we choose something else
