Session 1: Scarcity, Opportunity Cost, and Incentives Flashcards
Two things about economics
No such thing as a free lunch Incentives matter
____ is the root of economics
Scarcity
____ is the root of all economic problems
Scarcity
____ forces people to choose between options
Scarcity
What is the production possibility frontier?
A graph that has a different product on each axis, and a curve between them that describes the maximum possible combinations of production
What does a point within the production possibility frontier represent?
Inefficiency
What does a point outside the production possibility frontier represent?
Infeasibility
What does general movement of the production possibility frontier represent?
General growth in production
What is opportunity cost?
Highest valued alternative that must be given up when making a decision
Do you have a choice when calculating opportunity cost?
Yes
Do you have a choice when calculating value?
No
What are incentives?
Motivations for taking an action. They can be material, moral, or physical
How do incentives motivate people?
By appealing to their self interest
