Vocabulary: Unit Two Flashcards

1
Q

Demand

A

The quantity of a good that consumers are willing and able to purchase at various prices during a given period; the relationship between price and quantity demanded

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2
Q

Law of Demand

A

The inverse relationship between price and quantity demanded; as price rises, quantity demanded falls; as price falls, quantity demanded rises

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3
Q

Net benefits

A

Total benefits minus total costs

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4
Q

Sunk costs

A

A cost that can’t be avoided regardless of a current or future

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5
Q

Opportunity cost

A

The value of the next best alternative; the cost of a current decision

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6
Q

Positive economic analysis

A

Describes and predicts changes in an economy

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7
Q

Normative economic analysis

A

Uses positive analysis to make recommendations for how things ought to be

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8
Q

Production possibility frontier

A

PPF; represents all the possible combinations of maximum production, given available resources

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9
Q

Law of increasing opportunity costs

A

The opportunity cost of producing additional units increases as more units are produced

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10
Q

Absolute advantage

A

The ability to produce a good or service using fewer resources than other producers; measures cost in terms of resources used in production

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11
Q

Comparative advantage

A

The ability to produce a good or service with a lower opportunity cost than anyone else; measures costs in terms of alternative production given up

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12
Q

Scientific method

A

Making a hypothesis about a relationship and testing the hypothesis

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13
Q

Theory

A

A hypothesis that hasn’t been rejected after being tested

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14
Q

Law

A

Theory that is widely accepted as true

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15
Q

Ceteris paribus

A

All else equal

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16
Q

Fallacy of composition

A

Assuming that something true for a part also applies to the sum of the parts

17
Q

Association implies causation

A

Assuming that a statistical association between two events that one one causes the other

18
Q

Sample selection bias

A

Predicting behavior for an entire population from statistical analysis of a subset of the population

19
Q

Faulty ceteris paribus

A

Incorrectly assuming factors constant that cannot logically be held constant

20
Q

Unaccounted factors

A

Assuming that an association between two events will continue in the future without identifying how the association depends on the stability of other factors

21
Q

Model

A

A simplification of a real world concept so it can be studied; presents key characteristics and allow for accurate predictions