Econ 2301

Front 1

Economics

Back 1

The study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society.

Front 2

Scarcity

Back 2

The goods available are too few to satisfy individuals' desires.

Front 3

What are the 2 elements of Scarcity?

Back 3

Our wants and our means of fulfilling those wants.

Front 4

Name the 2 divisions of Economic theory.

Back 4

MICROeconomics & MACROeconomic Theory

Front 5

Microeconomics

Back 5

The study of individual choice, and how that choice is influenced by economic forces.

Front 6

Macroeconomic

Back 6

The study of the economy as a whole.

Front 7

What 3 central coordination problem any economy must solve?

Back 7

1) What, and how much, to produce.

2) How to produce it.

3) For whom to produce it.

Front 8

The quantity of goods, services and usable resources depends on what 2 things?

Back 8

Technology

Human action

Front 9

Macroeconomic considers issues such as what?

Back 9

Problems of inflation, unemployment, business cycles, and growth.

Front 10

Economic reasoning is making decisions on the basis of what?

Back 10

Costs and benefits.

Front 11

Marginal cost

Back 11

The additional cost to you over and above the costs you have already incurred.

Front 12

Sunk costs

Back 12

Costs that have already been incurred in and cannot be recovered.

Front 13

Marginal benefit

Back 13

The additional benefit above what you've already derived.

Front 14

TANSTAAFL

Back 14

There Ain't No Such Thing As A Free Lunch.

Front 15

Economic decision rule: MB > MC

Back 15

Do it!

Front 16

Economic decision rule: MB < MC

Back 16

Don't do it!

Front 17

Economic reasoning is based on the premise that everything has a ________?

Back 17

Cost

Front 18

Opportunity cost

Back 18

The benefits that you might have gained from choosing the next-best alternative.

Front 19

Economic forces (define)

Back 19

The necessary reactions to scarcity.

Front 20

Market force

Back 20

An economic force that is given relatively free rein by society to work through the market.

Front 21

Invisible hand

Back 21

The price mechanism, the rise and fall of prices that guides our actions in a market.

Front 22

Economic reality is controlled by what 3 forces?

Back 22

1) Economic forces (the invisible hand)

2) Social & cultural forces

3) Political & legal forces

Front 23

What 3 things play a significant role in the economy?

Back 23

Social, Cultural, and Political

Front 24

Economic model

Back 24

A framework that places the generalized insight of the theory in a more specific contextual setting.

Front 25

Economic principal

Back 25

A commonly held economic insight stated as a law or principal.

Front 26

Experimental Economic

Back 26

A branch of economics that studies the economy through controlled laboratory experiments.

Front 27

Natural (economic) experiments

Back 27

Naturally occurring events that approximate a controlled experiment where something has changed in one place but has not changed somewhere else.

Front 28

Theorems

Back 28

Propositions that are logically true based on the assumptions in a model.

Front 29

Precepts

Back 29

Policy rules that conclude that a particular course of action is preferable.

Front 30

Efficiency

Back 30

Achieving a goal as cheaply as possible.

Front 31

Invisible hand theorem

Back 31

A market economy, through the price mechanism, will tend to allocate resources efficiently.

Front 32

Economic policies

Back 32

Are actions (or inactions) taken by government to influence economic actions.

Front 33

Positive economics

Back 33

The study of what is, and how the economy works.

Front 34

Normative Economics

Back 34

The study of what the goals of the economy should be.

Front 35

Art of Economic

Back 35

The application of the knowledge learned in positive economics to achieve the goals one has determined in normative economics.

Front 36

Production Possibility Table

Back 36

Table that lists the trade-off between two choices.

Front 37

Production Possibility Curve (PPC)

Back 37

A curve measuring the maximum combination of outputs that can be obtained from a given number of inputs.

Hint 37

a.k.a. PPF - Production Possibility Frontier

Front 38

Comparative Advantage

Back 38

Better suited to the production of one good than to the production of another good.

Front 39

Productive efficiency

Back 39

Achieving as much output as possible from a given amount of inputs or resources.

Points on PPC

Front 40

Inefficiency

Back 40

Getting less output from inputs that, if devoted to some other activity, would produce more output.

Point inside PPC

Front 41

Efficiency

Back 41

Achieving a goal using as few inputs as possible.

Points on the PPC

Front 42

What did Adam Smith argued?

Back 42

It is humankind's proclivity to trade that leads to individuals using their comparative advantage.

Front 43

Laissez-faire

Back 43

An economic policy of leaving coordination of individuals' actions to the market.

Front 44

Globalization

Back 44

Increasing integration of economies, culture, and institutions across the world.

Front 45

Utility

Back 45

The pleasure or satisfaction people get from doing or consuming something (and the PRICE of doing or consuming that something).

Front 46

Total utility

Back 46

The total satisfaction one gets from consuming a product.

Front 47

Marginal utility

Back 47

The satisfaction one gets from consuming one additional unit of a product above and beyond what one has consumed up to that point.

Front 48

Principal of Diminishing Marginal Utility

Back 48

As you consume more of a good, after some point, the marginal utility received from each additional unit of a good decreases with each additional unit consumed, other things equal.

Hint 48

Too much of a good thing is bad.

Front 49

Principal of Rational Choice

Back 49

Spend your money on those goods that give you the most marginal utility (MU) per dollar.

Hint 49

The principal of this equation:

If MUx/Px > MUy/Py = choose additional unit of good x

If MUx/Px < MUy/Py = choose additional unit of good y

Front 50

Utility-Maximizing Rule

Back 50

When the ratio of the marginal utility to price of the two goods are equal.

Hint 50

MUx/Px = MUy/Py

Front 51

Law of Demand

Back 51

Quantity demanded is inversely related to price.

Hint 51

Price of a good goes up, the quantity we consume of it goes down.

Front 52

Budget Constraint

Back 52

A curve that shows us the various combinations of goods an individual can buy with a given amount of money.

Front 53

Indifference Curve

Back 53

A curve that shows combinations of goods among which an individual is indifferent.