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25 Cards in this Set
- Front
- Back
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Microeconomics |
Study of the decisions of individuals, households, and firms |
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Positive statement |
Statement about what is true which can be tested against facts |
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Normative statement |
Statement about what should be and requires value judgments |
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Ceretis paribus |
Assumption that in respect to 2 variables, all others remain constant |
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Fallacy of false cause (post-hoc fallacy) |
Assumed that because one event follows another, the first event must have caused the second |
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Fallacy of division |
Assumed that what is good for the whole is good for the parts |
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Fallacy of composition |
Assumed that what is true for the parts is also true for the whole |
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Scarcity |
The fundamental problem of economics that states there are not enough resources to produce everything people want and need |
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Factors of production |
Land, labor, Capital, Entrepreneurs |
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Opportunity cost |
Value of the best alternative that must be given up when a choice is made |
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Marginal benefit |
Additional benefit created when an action is taken |
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Marginal cost |
Additional cost incurred as a result of the action |
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Economic system |
The laws, traditions, institutions, and mechanisms designed to answer economy's basic questions |
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Who proposed the free market economy? |
Adam Smith, 1776 |
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Mercantilism |
Gov't policies that limited imports and restricted trade in order to accumulate gold |
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Capitalism |
Economic system based on privately owned resources and decentralized decision-making |
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Command/Socialist Economy |
Gov't owns & controls most resources and decides how to allocate them |
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Who founded the Communist economy? |
Karl Marx, 1848 |
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What kind of economy does the United States have? |
Mixed (Capitalist & Free market) |
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Circular flow model |
A model designed to explain economic relationships between households and businesses |
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Proprietorship |
A firm owned by a single individual |
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Partnership |
A firm owned by a group of individuals |
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Corporation |
A separate legal entity and usually owned by a group of stockholders |
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Trade surplus |
Value of exports exceeds value of imports |
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Trade deficit |
Value of imports exceeds value of exports |
