Unit 1 Flashcards
Microeconomics
Studies how individuals, households, and firms make decisions and how those decisions interact
Economics
Study of scarcity and choice
Individual Choice
decisions by individuals about what to do, which necessarily involve decisions about what not to do
Economy
system for coordinating a society’s productive and consumptive activities
Resource
anything that can be used to produce something else
Land
natural resources used to produce goods and services
Labor
the workers and their effort
Capital
manufactured goods to make other goods and services reusable products
Entrepreneurship
process of starting, organizing, managing and assuming the responsibility for a business
Scarcity
limited resources for unlimited wants and needs
Opportunity Cost
what you give up, amount of other products sacrificed to produce one product
Explicit Cost
Monetary expenses, costs that involve spending money
Implicit Cost
the cost of benefits that are given up, non-monetary opportunity costs
Economic aggregates
Economic measures that summarizes data across many different markets
economic model
simplified framework that is designed to illustrate complex processes
Ceteris Paribus
see other things as equal, all other things are help constant
Trade-off
sacrificing one thing for another, all the possible choices you didn’t make
- options where a choice can be made
tenants of capitalism
economic system in which private individuals or businesses own capital goods
Production Possibilities Curve (PPC)
shows the maximum quantity of one good that can be produced for each possible quantity of the other good produced
Efficiency
the productivity derived from the use of some resource
Inefficiency
production anywhere inside the curve (not using resources to maximum potential)
Economic good
a good or service that has a benefit to society
Economic growth
an increase in the capacity of an economy to produce goods and services compared from one period of time to another
Allocate
How resources are allotted to the people who want them
Rightward shift
when economy grows and output increases, we produce more, causing shift to the right
Leftward shift
a decrease in the production capacity of an economy
Technology
the technical means for the production of goods/services
Trade
in market economy, the individuals provide goods and services to others and receive goods and services in return
Specialization
different people each engage in the different task they are good at
Comparative advantage
lower relative or comparative cost that that of another
- who is more efficient based on opportunity cost
Absolute Advantage
2 parties involved, solve it by who produces more and more efficiently
Terms of Trade
indicate the rate at which one good can be exchanged for another
Independent Variable
variable that you can control and is not affected by any other variable
Dependent Variable
variable that depends on other factors
Curve on graph
increasing opportunity costs, curve shows efficient or inefficient
a country…
a country should specialize in and export the good for which it has a comparative advantage
Marginal
additional
Utility
satisfaction (utils, unit)
Marginal Benefit
additional benefit
Marginal cost
additional cost
Optimal choice
total net benefit, MB=MC
Diminishing Marginal utility
as I consume something more and more, I get less satisfaction each time I consume it
Utility Maximization
combination of 2 goods consumptions that weighs my costs and fives me the best choice
- individuals and companies seek to achieve the highest level of satisfaction from their economic decisions.
formula for marginal analysis
Mux/Px = MuY/Py
MU - Marginal Utility
x and y - cost of each
how to find consumer surplus
total benefit - total cost
What is a market economy?
Individuals
How does a market economy work?
Individual competition
For who is a market economy?
supply/demand
What is a command economy?
Government
How does a command economy work?
by the government
for who is the command economy
government
What is a mixed economy?
Individual own, government own, and the government regulates
How does a mixed economy work?
Businesses decide, government regulates
ex. FDA, EPA
