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Economics > Unit 1 - Basic Economic Concepts - DONE > Flashcards

Unit 1 - Basic Economic Concepts - DONE Flashcards

1
Q

Ceteris Paribus

A

“All else equal” - used as a basis to compare things and models

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2
Q

GDP

A

Gross Domestic Profit (all of the money that passes a point in a circular flow model in a year)

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3
Q

Command Economy

A

A system such as socialism in which the government makes all economic decisions

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4
Q

Capitalism

(Free market economy)

A

A system where there is a free market and decisions are made on what can be sold for the most money and made for the least

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5
Q

The basic economic problem

A

Scarcity - there are finite resources, but infinite human wants (people have to choose what to produce and consume)

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6
Q

Opportunity Cost

A

The forgone benefit of the next best option when making a decision

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7
Q

The three economic questions

A
  1. What to produce?
  2. How to produce?
  3. For whom to produce?
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8
Q

Three economic questions, command economy answers

A
  1. What to produce? - What the government wants produced
  2. How to produce? - How the government wants it produced
  3. For whom to produce? - For everyone, equally
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9
Q

Three economic questions, free market economy answers

A
  1. What to produce? - What the consumers send signals to producers for
  2. How to produce? - At the lowest cost possible
  3. For whom to produce? - Consumers who have the money to buy
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10
Q

The purpose of a production possibilities curve

A

To compare the ability to allocate resources for production

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11
Q

PPC (ppf)

A

Production possibilities curve (frontier)

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12
Q

The slope of the PPC is

A

Opportunity cost

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13
Q

Factors of production definition

A

The things/resources that make production possible

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14
Q

Factor Endowment

A

Amount of each factor of production a person, company, society, or country has, determining their ability to produce a given product

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15
Q

Linear PPC

A

Perfectly transferrable resources

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16
Q

Curved PPC

A

Not perfectly transferrable resources

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17
Q

Absolute Advantage

A

When a country is able to produce more of a good or service than another country with the same amount of resources [higher up on PPC axis]

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18
Q

Comparative advantage

A

When a country can produce a good at a lower opportunity cost (of another good) –> countries should specialize in these goods

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19
Q

Terms of trade

A

The cost at which countries are willing to sell goods to one another

20
Q

Marginal Utility

A

The benefit gained from consumption of the next good or service

21
Q

Law of diminishing marginal utility

A

The consumption of each extra product results in a decrease in the amount of satisfaction gained

22
Q

Land

A

The factor of production encompassing: anything produced by nature, natural resources, paid rent

23
Q

Labor

A

The factor of production encompassing: time and effort of workers, paid wages

24
Q

Capital

A

The factor of production encompassing: anything produced before to produce in the future, machines, buildings, etc. , paid interest

25
Q

Entrepreneurship

A

The factor of production encompassing: creative ability to bring other factors of production together, paid profit

26
Q

Resource Allocation

A

Involves answering 3 questions: What goods and services to produce? How to produce? And who consumes those goods and services?

27
Q

Implicit Costs

A

Indirect, non-purchased, or opportunity costs of resources provided by the entrepreneur

28
Q

Explicit Costs

A

Input costs that require an outlay of money by the firm - actual spending

29
Q

Consumer Choice Theory

A

Relates consumers’ wants and preferences to the goods and services they actually buy

30
Q

Marginal Cost

A

The additional benefit to a consumer from consuming one more unit of a good or service

31
Q

Marginal Analysis

A

Analysis that involves comparing marginal benefits (MB) and marginal costs (MC) - helps individuals (firms) decide whether to increase, decrease, or maintain their consumption (production) levels

32
Q

Optimal Quantity/Choice

A

Achieved when MB = MC or where total benefit is maximized

33
Q

Good

A

Goods are materials that satisfy human wants and provide utility, for example, to a consumer making a purchase of a satisfying product.

34
Q

Service

A

A type of economic activity that is intangible, is not stored and does not result in ownership. A service is consumed at the point of sale.

35
Q

PPC

Unattainable

A

Outside PPC

36
Q

PPC

Inefficient

A

Inside PPC

37
Q

PPC

Efficient

A

On PPC

38
Q

Country Focused on future term growth

A

More focus on capital goods

39
Q

Marginal

A

Additional; the change that results from an additional unit

40
Q

Utility

A

Ability or capacity of a good or service to be useful and give satisfaction to someone

41
Q

Private Property

A

Free Market Economy - property owned by individuals or companies

42
Q

Utility maximizing rule

A

Equating the ratio of the marginal utility of a good to its price for all goods

43
Q

Marginal Utility Per Dollar

A

The additional utility from spending one more dollar on that good or service (MU/P)

44
Q

Causes of an outward shift of PPC

A

Change in resource quantity, quality; change in technology; change in trade

45
Q

Consumer Surplus

A

The amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it (benefit - cost)

46
Q

Total Utility (TU)

A

The total amount of satisfaction obtained from consumption of a good or service

47
Q

Cost-benefit analysis

A

A decision-making process in which you compare what you will sacrifice and gain by a specific action - MB = MC

Economics (2 decks)

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