quiz 1ab Flashcards
economics
the study of the choices humans make in a world of scarcity
scarcity
wants are unlimited, but resources are limited
what does economics focus on? (3 things)
individuals, institutions, society
what are the 2 consumer resources?
money (to buy things) & time (to earn money)
what are the 4 producer resources?
land - physical land, animals and resources
labor - human workers and resources
capital - man made resources and the knowledge of workers; education levels
entrepreneurship - willing to take risks with LLC to make a profit
trade off
A SITUATION - an exchange of 1 thing in return for another
opportunity cost
MENTAL RANKINGS - the value of the next highest alternative
explicit opportunity cost
what you payed for
implicit opportunity cost
what you could have bought (basically opportunity cost)
____ -> _____ -> _____
scarcity -> choice -> opportunity cost
marginal analysis
benefits and costs
marginal changes
small adjustments to a plan of action
when do you take action buying consumer items?
when marginal benefit = marginal cost
utility
the satisfaction from consuming a good or service
what unit is utility measured in?
utils
celenis paribus
other things equal
What does PPC stand for?
Production Possibilities Curve
What does PPC have to do with econmics?
the possible combinations of goods and services that can be produced by a single nation, firm, or individual
what 4 things can we assume from ppc?
- full employment
- fixed resources
- fixed technology
- 2 goods (consumer & capital)
what happens in an increasing ppc opportunity cost graph?
the economic resources we use aren’t the same for both products, so therefore the cost to make product A may require the lost of 2 of product B. If product A is increased again, 4 of product B will be lost
what happens in a constant ppc opportunity cost graph?
the economic resources are the same / similar for both products. Therefore, every time product A is increased, product B will consistently decrease.
what happens if a nation focuses more on capital goods rather than consumer goods?
economic growth
what can contribute to economic growth & a shift to the right on the graph? (4 things)
- more resources
- advances in technology
- trades within countries
- focus on capital goods
what does it mean if there are points inside the curve? (not on the line, but rather inside)
unemployment
what does it mean if there are points outside the curve?
unattainable
what happens when the economy grows? (3 things)
- the production possibilities curve shifts outward
- present choices & future possibilities
- how resources now can improve economic growth in the future
what effects does implications on international trade have?
specialization and trade have the same effect as more/ better resources
what does it mean for a nation to be economically efficent?
they use the limited resources to get the max amount of utility
what are some examples of economic efficiency? (2 things)
- full employment
2. full production
what is optimal allocation?
how a society decides its optimal point on the PPC
how should economic activity be expanded?
to the point where MB=MC
