Unit 1 Flashcards
What’s the overarching idea of Scarcity?
Individuals and societies are forced to make choices because resources are scarce.
Define Economics
Behavior science/social science concerned with how scarce resources are allocated among unlimited wants, needs, and desires. (Resources
To be scarce means to be _____ and _____; the opposite of scarcity is _____.
Limited-Wanted-Abundance
Define Scarcity
Fundamental concept of economics; leads to trade-offs (choices).
Resources- _____- _____
FOP-CELL
Factors of Production: Physical Capital- Entrepreneur- Land (Raw Materials/Natural Resources)-Labor (Human Capital).
Define Physical Capital
Buildings- Equipment (for example whiteboards and textbooks).
Define Economic Perspective
A viewpoint that envisions individuals and institutions making rational decisions by comparing the marginal benefits and marginal costs associated with their actions.
Define Opportunity Costs
The amount of other products that must be gone or sacrificed to produce a unit of a product.
Define Utility
The want-satisfying power of a good or service; the satisfaction or pleasure a consumer obtains from the consumption of a good or service (or from the consumption of a collection of goods and services).
Define Purposeful Behavior
People make decisions with some desired outcome in mind.
What’s the purpose of Self-Interested Behavior?
Increase potential self-satisfaction, however it may be derived.
Define Marginal Analysis
The comparison of marginal (extra or additional) benefits and marginal costs, usually for decision making.
_____ is always present when a choice is made.
Opportunity-Cost
Define Scientific Method
The procedure for the systematic pursuit of knowledge involving the observation of facts and the formulation and testing of hypotheses to obtain theories, principles, and laws.
Define Economic Principle
A widely accepted generalization about the economic behavior of individuals or institutions.
What are some things to know about economic principles?
Generalizations- Other-thing-equal assumption- Graphical Expression GOG
Define Generalizations
Economic principles are generalizations relating to economic behavior or to the economy itself.
Define Other-Things-Equal Assumption
The assumption that other factors than those being considered are held constant; ceteris paribus assumption.
What two levels of economics are there?
Microeconomics-Macroeconomics
Define Microeconomics
The part of economics considered with decision making by individual units such as a household, a firm, or an industry and individual markets, specific goods, and services and product and resource prices.
Define Macroeconomics
The part of economics concerned with the performance and behavior of the economy as a whole. Focuses on economic growth, the business cycle, interest rates, inflation, and the behavior of major economic aggregates such as the household, business, and government sectors.
Define Aggregate
A collection of specific economic units treated as if they were one unit. Examples: the prices of all individual goods and services are combined into the price level, and all units of output are aggregated into gross domestic products.
Define Positive Economics
The analysis of facts or data to establish scientific generalizations about economic behavior.
Define Normative Economics
The part of economics involving value judgements about what the economy should be like; focused on which economic goals and policies should be implemented; policy economics.
Positive economics concerns _____, whereas normative economics embodies subjective feelings of _____.
What is- What ought to be
Define Economizing Problem
The choices necessitated because society’s economic wants for goods and services are unlimited but the resources available to satisfy these wants are limited (scarce).
Define Budget Line
A line that shows the different combinations of two products a consumer can purchase with specific money income, given the prodcuts’ prices.
What things to the Budget Line reveal?
Attainable and Unattainable Combinations-Trade-Offs and Opportunity Costs-Choices-Income Changes
For the movie and book combination example, an increase in money income shifts the budget line to the _____ and a decrease in money income shifts the budget line to the _____.
Right-Left
Define Economic Resources
The land, labor, capital, and entrepreneurial ability that are used to produce goods and services; the factors of production. LLCE
Define Land
In addition to the part of the earth’s surface not covered by water, this term refers to any and all natural resources that are used to produce goods and services. Thus, it includes the oceans, sunshine, coal deposits, forests, the electromagnetic spectrum, and fisheries.
Define Labor
Any mental or physical exertion on the part of a human being that is used in the production of a good or service.
Define Capital
Human-made resources used to produce goods and services; goods that do not directly satisfy human wants; also called capital wants.
Define Investment
In economics, spending for the production and accumulation of capital and additions to inventories.
Define Entrepreneurial Ability
The human resource that combines the other economic resources of land, labor, and capital to produce new products or make innovations in the productions of existing products; provided by entrepreneurs.
Define Entrepreneurs
Individuals who provide entrepreneurial ability to firms by setting strategy, advancing innovations, and bearing the financial risk if their firms do poorly.
Define Factors of Production
The four economic resources: land, labor, capital, and entrepreneurial ability.
Define Full Employment
The economy is employing all of its available resources.
Define Fixed Resources
The quantity and quality of the factors of production are fixed.
Define Fixed Technology
The state of technology (the methods used to produce output) is constant.
Define Two Goods
The economy is only producing two goods.
Define Consumer Goods
Products and services that satisfy human wants directly.
Define Production Possibilities Curve
A curve showing the different combinations of two goods or services that can be produced in a full-employment, full-production economy where the supplies of resources and technology are fixed.
Define Law of Increasing Opportunity Costs
The principle that as the production of a good increases, the opportunity cost of producing an additional unit increases.
Where does the optimal amount of activity occur?
When MB (Marginal Benefit)=MC (Marginal Cost)
Define Economic Growth
An outward shift in the production possibilities curve that results from an increase in resource supplies or quality or an improvement in technology; an increase of real output (gross domestic product) or real output per capita.
Define the Invisible Hand of Capitalism
The concept that society’s goals will be met as individuals seek their own self-interest.
Define Mixed Economies
A system with free markets but also some government intervention.
Countries that produce more _____ will have more growth in the future.
Capital Goods
Define Absolute Advantage
The producer can produce the most output or requires the least amount of inputs (resources).
Define Comparative Advantage
The producer with the lowest opportunity cost.
When should countries trade?
When they have a relatively lower opportunity cost.
How do you calculate comparative advantage?
You have to calculate per-unit opportunity cost.
Define Terms of Trade
Both countries can benefit from trade if they each have relatively lower opportunity costs; the agreed upon conditions that would benefit both countries.
Define Demand
Different quantities of goods that consumers are willing and able to buy at different prices.
Define Law of Demand
There is an INVERSE relationship between price and quantity demanded
What are the shifters of Demand?
Taste and Preferences- Number of Consumers- Price of Related Goods- Income-Future Expectations D-TN-PIE
Define Supply
The different quantities of a good that sellers are willing and able to sell (produce) at different prices.
Define the Law of Supply
There is a DIRECT relationship between price and quantity supplied.
What are the shifters of Supply?
Prices/Availability of inputs (resources)- Number of Sellers- Technology- Government Action: Taxes & Subsidies & Regulation- Expectation of a Future Profit. S-PN-TGE
Why are the topics of Supply and Demand put together?
In order to determine equilibrium price and equilibrium quantity.
Define the Double Shift Rule
If two curves shift at the same time, either price or quantity will be indeterminate (ambiguous).
Define Price Ceiling
Maximum legal price a seller can charge for a product.
Define Price Floor
Minimum legal price a seller can sell a product.
What is the goal of a price ceiling?
Make affordable by keeping price from reaching equilibrium.
What is the goal of a price floor?
Keep price high by keeping price from falling to to equilibrium.
Define Trade Deficit
When imports exceed exports. DIE
Define Trade Surplus
When exports exceed imports.
Define Land-Intensive Goods
Products requiring relatively large amounts of land to produce.
Define Labor-Intensive Goods
Products requiring relatively large amounts of labor to produce.
Define Capital-Intensive Goods
Products requiring relatively large amounts of capital to produce.
Give some examples of land-intensive goods.
Beef, wool, and meat. BWM
Give some examples of capital intensive goods.
Airplanes-Automobiles-Machinery AAM
Give some example of labor-intensive goods.
Textiles-Electronics-Toys TET
What are the types of tax?
CIT (Corporate Income Tax) and Excise Tax.
Define Excise Tax
Tax on Manufacturing
Define Subsidies
Reverse Tax.
What causes a movement on the demand graph?
Change in price; it indicates change in the quantity demanded, not demand.
What causes a movement on the supply graph?
Change in price; it indicates change in the quantity supplied, not supply.
