Unit 1: Economic Principles Flashcards
Scarcity
Individuals and groups have unlimited wants and needs but decisions are made knowing that there are only a limited amount of resources available
Trade-offs
Giving up something when having to make a decision due to scarcity (Sacrificing one thing for another)
Opportunity Cost
The value of the first top option NOT chosen when making a decision. The cost of the thing we give up.
(What if)
What are the Factors of Production?
Land
Enterprise
Labor
Capital
What is Land?
Natural resources available for production
What is Labour?
The human input into the production process
What is Enterprise?
Entrepreneurs organize factors of production and take risks
What is Capital?
Goods used to give service
Positive Economics
“What is”
Factual and Objective
No indication of endorsement or disapproval.
Absolute Statements
Normative
Opinion based
Subjective and value judgments
”should”
Opens the door for discussion
Correlation
Relationship between two variables
Causation
Variables share a CAUSE & EFFECT relationship
What are Incentives?
Expectations, rewards, motivation or punishment that encourages a certain behavior
What are the different types?
Moral
Social
Economic
Coercive
What is moral incentive?
You want to do the “right thing” not the “wrong thing”
Social Incentive
Peer pressure
Does something that is viewed well by other
Better social statud
Economic Incentive
Monetary
Expects financial reward or avoiding a financial penalty
Coercive
Punishment
Unintended Consequence
An unintended result of people using the incentive
Explicit Costs
Use of money; spending
Implicit Costs
Opportunity costs
Stuff you use in your jobs you already had
A cost that exists without the exchange of cash and is not recorded
Variable Costs
Costs that change based on how much is produced or consumed
Fixed Costs
One time costs that do not change based on how much is produced or consumed
Supply
Refers to the amount of goods that are willing and are to be be available
Demand
Refers to consumers who are willing and able to purchase goods/services
Producers
Willing and able to supply the good/service
Shortage on a graph
Below Equilibrium price
Surplus on a Graph
Above equilibrium price
Substitute Good
Replace
Ex: Choosing Freud over tots in a combo
Complementary Good
Goes well along with another good. A packaged deal
Inferior good
Cheaper, less quality
Shein
