Unit 1: Basic Concepts Flashcards

1
Q

Economics

A

Study of scarcity and choice

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2
Q

Individual choice

A

Decisions by individuals about what to do and what not to do

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3
Q

Economy

A

System that coordinates choices about production with choices about consumption, and distributes goods and services to the people who want them

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4
Q

Market economy

A

Production and consumption are the result of decentralized decisions by many firms and individuals (no central authority)

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5
Q

Command economy

A

Industry is publicly owned and there is a central authority making production and consumption decisions

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6
Q

Incentives

A

Rewards or punishments that motivate particular choices

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7
Q

Property rights

A

Establish ownership and grant individuals the right to trade goods and services with each other

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8
Q

Marginal analysis

A

Study of costs and benefits of doing a little bit more of an activity versus a little bit less

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9
Q

Resource

A

Anything that can be used to produce something else

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10
Q

Land

A

All resources coming from nature, such as minerals, timber, and petroleum

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11
Q

Labor

A

Effort of workers

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12
Q

Capital

A

Manufactured goods used to make other goods and services

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13
Q

Entrepreneurship

A

Efforts of entrepreneurs in organizing resources for production, taking risks to create new enterprises, and innovating to develop new productions and production processes

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14
Q

Scarce

A

Resource not available in sufficient quantities to satisfy all the various ways a society wants to use it

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15
Q

Opportunity cost

A

Value of what must be given up when making a particular choice

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16
Q

Microeconomics

A

Study of how people make decisions and how those decisions interact

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17
Q

Macroeconomics

A

Concerned with overall ups and downs in the economy

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18
Q

Economic aggregates

A

Economic measures that summarize data across many different markets

19
Q

Positive economics

A

Branch of economic analysis that describes the way the economy actually works

20
Q

Normative economics

A

Makes prescriptions about the way an economy should work

21
Q

Business cycle

A

Short-run alternation between economic downturns (recessions) and economic upturns (expansions)

22
Q

Depression

A

Deep and prolonged economic downturn

23
Q

Expansions

A

Periods of economic upturns (recoveries) when output and employment are rising

24
Q

Employment

A

Number of people currently employed in the economy

25
Unemployment
Number of people who are actively looking for work but aren't currently employed
26
Labor force
Equal to the sum of employment and unemployment
27
Unemployment rate
Percentage of the labor force that is unemployed
28
Output
Quantity of goods and services produced
29
Aggregate output
Economy's total production of goods and services for a given period of time
30
Inflation
Rising overall price level
31
Deflation
Falling overall price level
32
Price stability
When the economy's aggregate price level is changing slowly
33
Economic growth
An increase in the maximum amount of goods and services an economy can produce
34
Model
Simplified representation used to better understand a real-life situation
35
Other things equal assumption
All other relevant factors remain unchanged (also known as the ceteris paribus assumption)
36
Trade-off
Give up something in order to have something else
37
Production possibilities curve (PPC)
Illustrates the trade-offs facing an economy that produces only 2 goods, and shows the maximum quantity of one good that can be produced for each possible quantity of the other good produced
38
Efficient
No way for anyone in an economy to be better off without making at least 1 person worse off
39
Technology
Technical means for producing goods and services
40
Trade
Providing goods and services to receive goods and services in return
41
Gains from trade
People can get more of what they want through trade than they could if they tried to be self-sufficient (due to specialization)
42
Specialization
Each person specializes in the task that he or she is good at performing
43
Comparative advantage
An individual has this in producing a good or service if the opportunity cost of producing the good or service is lower for that individual than for other people
44
Absolute advantage
An individual has this in producing a good or service if he or she can make more of it with a given amount of time and resources (not the same thing as a comparative advantage)