Page 1 Flashcards
What is Economics about?
Economics is the study of choices concerned with production, consumption, and the transfer of wealth through goods and services within an economy.
What is an economy?
An economy is a set of interrelated production and consumption activities that aid in the allocation of scarce resources.
What is the economic problem?
The economic problem is how a society can satisfy its unlimited wants with its limited resources.
What are individual wants?
Individual wants are the wants of each person, which depend on their preferences, how the wants can be satisfied, and their ability to purchase the wants.
What are collective wants?
Collective wants are the wants of the whole community and are usually provided by the government through their taxation revenue.
What are the key economic issues?
- What to produce
- How much to produce
- How to produce
- How to distribute production
What is opportunity cost?
Opportunity cost is the cost of the alternative foregone.
How is opportunity cost calculated?
Opportunity cost = what is gained / what is foregone.
What is utility?
Utility is a measure of ‘want-satisfying-power’, or the satisfaction that a good or service provides when consumed.
What is marginal utility?
Marginal Utility is the satisfaction provided from consuming an additional unit.
What is the production possibility frontier (PPF)?
The PPF is a graphical representation of all the possible combinations of the production of two goods or services that an economy can produce.
What assumptions does the PPF make?
- The economy produces only two goods
- The state of technology is constant
- The quantity of resources is constant
- All resources are fully employed
What can cause the PPF to move outwards?
The PPF can move outwards due to technological progress.
True or False: The PPF represents opportunity cost.
True
Fill in the blank: The economic problem requires a society to prioritize its _______.
[wants]
