What is Economics? Flashcards
What is Scarcity?
It means that the demand for a good or service is greater than the availability of the good or service.
What are the three broad categories that society’s resources are often divided into?
A society’s resources are often divided into the three broad categories of land, labor, and capital.
What factors dose the resource of Land cover?
Land includes all-natural endowments, such as arable land, forests, lakes, crude oil, and minerals.
What factors dose the resource of Labor include?
Labour includes all mental and physical human resources, including entrepreneurial capacity and management skills.
What factors dose the resource of Capital include?
Capital includes all manufactured aids to production, such as tools, machinery, and buildings.
What are the factors of production?
Factors of production
Resources used to produce goods and services; are frequently divided into the basic categories of land, labor, and capital.
What would we consider to be “Goods”?
goods
Tangible products, such as cars or shoes.
What would we consider to be “Services”?
services
Intangible products, such as legal services and education.
What do people use goods and services for?
People use goods and services to satisfy their wants.
What is production?
production
The act of making goods or services.
What must different societys decide in the face of scarcity?
Because resources are scarce, all societies face the problem of deciding what to produce and how much each person will consume. Societies differ in who makes the choices and how they are made, but the need to choose is common to all.
What is cost?
Just as scarcity implies the need for choice, so choice implies the existence of cost. A decision to have more of one thing is necessarily a decision to have less of some other thing. The cost of the more of one thing is the amount of the other thing we must give up in order to get it.
What is Opportunity cost?
opportunity cost
The value of the next best alternative that is forgone when one alternative ischosen.
What is a Production Possibility Boundary?
production possibilities boundary
A curve showing which alternative combinations of output can be attained if all available resources are used efficiently; it is the boundary between attainable and unattainable output combinations.
What are the four key economic problems?
What Is Produced and How?
What Is Consumed and by Whom?
Why Are Resources Sometimes Idle?
Is Productive Capacity Growing?
What is resource allocation?
resource allocation
The allocation of an economy’s scarce resources among alternative uses.
What are some questions we should consider when we are thinking about who consumes what in a society?
If the production takes place in the country’s production?
Who gets a lot, who gets a little, and why?
Should governments care about this distribution of consumption and, if so, what tools do they have to alter it?
Will the economy consume exactly the same goods that it produces?
Or will the country’s ability to trade with other countries permit the economy to consume a different combination of goods?
What are some questions to consider when thinking about why certain resources can sometimes remain idle?
Why are resources sometimes idle? Should governments worry about such idle resources, or is there some reason to believe that such occasional idleness is necessary for a well-functioning economy?
How can growth in a country’s production capacity be represented on a graph?
Growth in a country’s productive capacity can be represented by an outward shift of the production possibilities boundary
What is Microeconomics?
microeconomics
The study of the causes and consequences of the allocation of resources as it is affected by the workings of the price system.
the part of economics concerned with single factors and the effects of individual decisions.
What is macroeconomics?
macroeconomics
The study of the determination of economic aggregates such as total output, employment, and growth.
the part of economics concerned with large-scale or general economic factors, such as interest rates and national productivity.
What is a Market failure and how can government policy be used to remedy it?
market failures, which arise when free markets lead to too much of some goods being produced (like pollution) and too little of others (like national parks). Government policy could be used to alter the allocation of the economy’s resources to correct these market failures.
When looking at the production possibilities boundary, any point outside the boundary represents (Blank).
Scarcity
The negative slope of the PPB represents…
Opportunity cost
A straight line PPB graph represents that the opportunity cost of each good is (blank)
Constant
A PPb that is concave to the origin indicates a (Blank) amount of one good must be given up to produce more of the other good
Increasing
Consider an economy producing two goods, A and B, with a PPB concave to the origin. As the economy produces more of good A and less of good B , its opportunity cost of producing good A is (Blank)
Increasing
