Module 1 Video/Slides Flashcards
Unlimited Wants vs Scarce Resources
Unlimited Wants: Food, Entertainment, Vacation, Clothing
Scarce Resources: Income, Time, Land, Energy
What are marginal costs?
Marginal costs are the extra costs associated with one more unit of consumption. (Not just monetary)
What are marginal benefits?
Marginal benefits are the extra benefits associated with one more unit of consumption. (Not just monetary)
Capital is paid in…
Interest
Economists believe that individuals and firms both make ________ choices.
rational
Rational as in making decisions that make you better off. As a consumer you want to be happy, so rationality says, you’ll make decisions that will make you happy.
Whereas, firms want to be profitable, so rationality says they’ll make decisions that make them more profitable.
Rationality means that
you do things that get you closer to your goals
Tradeoff
Choosing one thing and therefore limiting another possibility–required due to scarce resources. (If you can only afford one snack, ice cream or popcorn, you don’t get whatever you don’t choose.) (There’s always a benefit and a cost to every tradeoff or choice.)
The choices we make are often created by some type of…
incentive. These can be positive or negative (the carrot or the stick). They can be personal, monetary, based on opportunities, or any number of other forms of incentives.
It is common practice in economics to always put the price on the _______ axis and put the quantity on the __________ axis
Price on the vertical axis and quantity on the horizontal axis.
The point where the axes intersect is called the
origin - It has a value of zero for each variable
How do economists title their graphs about the quantity of demand vs the price of a good?
They title the graph with information on the good there talking about with the time frame (such as coffee per hour)
Demand curve
A line on a graph that shows the quantity demanded at different prices.
Curve
A term used for any line in a graph that shows a relationship between 2 variables. (It can still be a straight line as well-always called a curve).
Downward sloping curve
The relationship between price and quantity is a negative or inverse relationship- as price goes down, quantity goes up-the two variables move in opposite directions.
Positive or direct relationship
Both variables move in the same direction. (Ex: When quantity increases, cost increases. When quantity decreases, costs decrease.)
A’
A prime - Primes are used to create a second curve on a graph when factors other than the variables on the graph change in order to make a new curve necessary (such as the weather changing the quantity demanded at each price).
A shift in a curve implies that…
new values of one variable and each value of the other variable (such as a new quantity at each price when an item is more in season-hot chocolate in winter or ice cream in summer).
Movement along a curve
A change from one point on a curve to another that occurs when one of the variable on the axis change (like price changing)
A new curve is necessary when…
Something other than the variables on each axis changes (like season or a pandemic changing the quantity demanded at certain prices)
