Eco 201

Front 1

Economics

Back 1

the study of the choices
that individualsmake given the
presence of scarcity.

Front 2

Scarcity

Back 2

limited resources but
unlimited wants

Front 3

Capital

Back 3

Resources produced using land and labor
(Man-made)

Front 4

Entrepreneurial Ability

Back 4

knowledge and nerve to
take business risks and combine 1-5 for production

Front 5

Opportunity Cost

Back 5

The highest valued benefit that must be
sacrificed (forgone) as the result of
choosing an alternative

Front 6

9 Guideposts for Economic Thinking

Back 6

1. Decision-makers choose purposefully (rational decision-makers)
2. Costs & benefits are subjective
3. Incentives Matter
4. Individuals make decisions at the margin
5. Opportunity Cost
6. The acquisition of info. is costly
7. Anticipate secondary effects (unintended consequences)
8. The test of the theory is its ability to predict
9. Forces influence economic outcomes

Front 7

Sunk Cost

Back 7

something that's already been spent so we shouldn't take it into accound wen weighing costs and benefits

Front 8

Economic Theory

Back 8

generalization about the working of an abstract economi

Front 9

Economic Models

Back 9

we use simple abstract models to study larger, more complex concepts
(models of production, use for policy analysis)

Front 10

The Art of Economics

Back 10

positive economics allows us to study the facts about how the economy works
normative economics used to identify problems and prescribe solutions

Front 11

The Invisible Hand (Adam Smith)

Back 11

supply and demand...price mechanism, not controlled by anyone

Front 12

The Invisible Handshake

Back 12

forces that come from morals, values, and ethics...voluntarily choose not to participate in a market

Front 13

The Invisible Foot

Back 13

gov't says some market is illegal/legal...it controls the market

Front 14

Opportunity Cost

Back 14

highest valued alternative

Front 15

Ceteris Paribus

Back 15

holding all else constant

Front 16

Factors of Production

Back 16

land, labor, capital, entrepreneurial skill

Front 17

Production Possibility Frontier (PPF)

Back 17

A graph that shows the combinations of 2 commodities that can be produced given a fixed level of technology & resources being used efficiently @ a fixed point in time

Front 18

Efficiency

Back 18

getting as much output from as few inputs as possible

Front 19

The Law of Increasing Marginal Opportunity Costs

Back 19

As an economy produced more of a good, the opportunity cost of an additional unit, expressed in terms of other goods sacrificed, will increase

Front 20

Law of Comparative Advantage

Back 20

individuals, firms, regions, or nations can gain by specialization in the production of goods that they produce cheaply (@ lower opp. cost) & exchange them for goods they can't produce @ low opp. cost

Front 21

Property Rights

Back 21

the rights to use, control and obtain the benefits from a good or service

Front 22

Private Property Rights

Back 22

property rights that are exclusively held by an owner and protected against invasion by others. Private property can be transferred, sold, or mortgaged at the owner's discretion

Front 23

Tragedy of the Commons

Back 23

Problem of overuse of a resource when property rights not clearly established

Front 24

3 Main Questions about Economy

Back 24

1. What, and how much, to produce
2. How to produce it
3. For whom to produce it

Front 25

Essentials for effective transition from a command to market economy

Back 25

1. Achieve Price Stability
2. Establish and Maintain Private Property Rights
3. Allow market incentives to motivate decision-makers
4. Allow prices to fluctuate in response to supply and demand
5. Establish a broadly obeyed legal system and climate of trust
6. Helping individuals think in a market-oriented way