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26 Cards in this Set

  • Front
  • Back
What is scarcity?
fundamental economic problem, inability to satisfy all our wants
Microeconomics
study of choices that individuals and businesses make, the way these choices interact, and the influences that govt exerts on these choices
Three Big Microeconomic Question
1. What G/S are produced and in what quantities
2. How are goods and servies produced
3.For whom are G/S produced?
Factors of Production?
resources businesses use to produce G/S
1-Land
2-Labor
3-Capital
4-Entrepreneurship
Different type of income earned from the Factors of Production
Land earns rent
labor earns wages
Captial earns interest
entrepreneurship earns profit
Tradeoff
A choice, giving something to get something else
opportunity cost
choice of the highest-valued alternative forgone (single choice not multiple forgone because it is the highest-valued)

All tradeoffs involve OC
Margin
When a choice is changed by a small amount or by a little at a time it is made at the margin
*Make choices by evalutating marginal benefit vs. marginal cost
Marginal Benefit
*Benefit that arises from an increase in activity
*benefit from recieving one more unit of G/S
*maximum amount a person is willing to pay
Marginal Cost
*Cost of an increase in activity
*OC of producing one more unit of good
*Best alternative forgone
*total cost/increase in output
Positive statement
What is....

Can be shown to be T/F
How the world actually is not what one wishes
Normative statement
What ought to be....

Matters of opinion
Ceteris paribus
"other things being equal"
What is scarcity?
fundamental economic problem, inability to satisfy all our wants
Microeconomics
study of choices that individuals and businesses make, the way these choices interact, and the influences that govt exerts on these choices
Three Big Microeconomic Question
1. What G/S are produced and in what quantities
2. How are goods and servies produced
3.For whom are G/S produced?
Factors of Production?
resources businesses use to produce G/S
1-Land
2-Labor
3-Capital
4-Entrepreneurship
Different type of income earned from the Factors of Production
Land earns rent
labor earns wages
Captial earns interest
entrepreneurship earns profit
Tradeoff
A choice, giving something to get something else
opportunity cost
choice of the highest-valued alternative forgone (single choice not multiple forgone because it is the highest-valued)

All tradeoffs involve OC
Margin
When a choice is changed by a small amount or by a little at a time it is made at the margin
*Make choices by evalutating marginal benefit vs. marginal cost
Marginal Benefit
*Benefit that arises from an increase in activity
*benefit from recieving one more unit of G/S
*maximum amount a person is willing to pay
Marginal Cost
*Cost of an increase in activity
*OC of producing one more unit of good
*Best alternative forgone
*total cost/increase in output
Positive statement
What is....

Can be shown to be T/F
How the world actually is not what one wishes
Normative statement
What ought to be....

Matters of opinion
Ceteris paribus
"other things being equal"