Nature and Scope of Economics Flashcards
- How society manages its scarce resources
- Behavior of a producer & a consumer
- How society meets its unlimited wants & needs with its limited resources
ECONOMICS
SOCIETY FACES A SHORT-RUN TRADEOFF BETWEEN INFLATION AND UNEMPLOYMENT.
The __________________ illustrates the tradeoff between inflation and unemployment:
Phillips Curve;
PRICES RISE WHEN THE GOVERNMENT PRINTS TOO MUCH MONEY.
__________ is an increase in the overall level of prices in the economy.
Inflation
A COUNTRY’S STANDARD OF LIVING DEPENDS ON ITS ABILITY TO PRODUCE GOODS & SERVICES.
Standard of living may be measured in different ways:
– By comparing _____________.
– By comparing the ______________________________.
personal incomes; total market value of a nation’s production
When the market fails, the __________ intervene to promote efficiency and equity.
government
MARKETS ARE USUALLY A GOOD WAY TO ORGANIZE ECONOMIC ACTIVITY
An economic system in which economic decisions and the pricing of goods and services are guided by the interactions of a country’s individual citizens and businesses (Investopedia).
Market economy
Allows people to specialize in what they do best
TRADE CAN MAKE EVERYONE BETTER OFF
RATIONAL PEOPLE THINK AT THE MARGIN
Cost vs. Benefit
(additional ______ & additional ________) econ
cost; benefit
(10 Principles of Economics)
Rational behavior for _________________
PEOPLE RESPOND TO INCENTIVES
THE COST OF SOMETHING IS WHAT YOU GIVE UP TO GET IT
(Opportunity Cost)
Alternative Foregone
Let go of one option (lagi)
(10 Principles of Economics)
What principle states that there’s no such thing as free lunch!
Laging may kapalit
PEOPLE FACE TRADE OFFS
___________________________: For you to be better off, somebody must be worse off.
Pareto efficiency principle
The ________________ of an item is the next best alternative choice that you give up to obtain that item.
What’s important to you
opportunity cost
__________________ – the ability to produce goods and services at a lower opportunity cost, not necessarily at a greater volume or quality (Investopedia).
Comparative advantage
____________________ – show how countries can gain from trade by specializing in producing and exporting the goods that they can produce more efficiently than other countries (Investopedia).
Absolute advantage trade
________ increases the variety of goods and services available
Trade
_________ can make everyone better off
Trade
“______________” – force between buyer and seller
Government → health, education, & security
Invisible hand
________ - A place where parties can gather to facilitate the exchange of goods and services (Investopedia).
Market
_____________ (father of classical market)
No government intervention
Adam Smith
Therefore, how much each worker can ______________________ determines overall living standards within a nation.
produce per hour of work
