Powerpoints Flashcards
What are the three central problems of economics?
What to produce? How to produce it? For whom to produce?
What is the scientific method?
A method of explanation that develops or tests theories about how observable facts or events are related.The goal of the scientific method is explanation.
Why does scarcity exist?
Because nature does not provide us with all of the resources required to satisfy our unlimited wants.
What is a trade-off?
The sacrifice of one good or service to purchase or produce another good or service.
What is opportunity cost?
The value of the next-best alternative.
What is efficiency?
Producing the greatest value for the least possible cost; achieving a goal as cheaply as possible.
What is equity?
The relative distribution of resources among individuals and groups in society, according to notions of fairness and justice.
What is the Gini Coefficient?
A metric that economists use to measure and compare income inequality.
What is a Production Possibilities Curve (PPC)?
An economic model that allows us to understand opportunity cost, comparative advantage, and the gains from specialization and trade.
What is the principle of increasing Marginal Opportunity Cost?
In order to get more of something, one must give up ever-increasing quantities of something else.
What is comparative advantage?
The ability of a person (or state, region, country) to perform an activity, or produce a good, or service at a lower opportunity cost than someone else (or some other state, region, or country).
Why does comparative advantage exist?
Because some resources are better suited to the production of one good than to the production of another good.
What is the difference between comparative advantage and absolute advantage?
Comparative advantage means having the lowest opportunity cost. Whereas, absolute advantage means being better than someone else at a particular activity.
What is the cheapest method of production?
Productive efficiency.
How do you produce in a free market system?
- Using productive efficiency - driven by competition.
2. Outsourcing - driven by efficient production in competitive globalized markets.
