Econ 51 Exam 1

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Economics

Back 1

the study of how humans make decisions in the face of scarcity

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Scarcity

Back 2

The concept in which the human wants for goods, services, and resources exceed what's available.

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Division of labor

Back 3

The concept in which the way a good or service is produced is divided into a number of tasks that are performed by different workers, instead of all the tasks being done by one person

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Specialization

Back 4

The concept in which workers are allowed to focus on the parts of the production process where they have an advantage

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Core competency

Back 5

The concept in which a business that focuses on one or a few products is more successful than firms that try to make a wide range of products

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Economies of scale

Back 6

The concept in which for many goods, as the level of production increases, the average cost of producing each individual unit declines

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Microeconomics

Back 7

Economics that focuses on the actions of individual agents within the economy

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Macroeconomics

Back 8

Economics that looks tat the economy as a whole

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Monetary policy

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A policy that affect bank lending, interest rates, and financial capital markets. In the U.S., this is conducted by the federal reserve

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Fiscal policy

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A policy that involves government spending and taxes which is determined by a nation's legislative body. In the U.S., Congress and the executive branch determines this.

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Theory

Back 11

A simplified representation of how two or more variables interact with each other

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Model

Back 12

A more applied and empirical representation of how two or more variables interact with each other

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Circular flow diagram

Back 13

A depiction of how money and products are exchanged within an economy. It might be used by a business to show how a specific series of exchanges of goods, services, and payments make up the building blocks of a given economic system of interest

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Command economy

Back 14

An economy where economic decisions are passed down from government authority and where resources are owned by the government as well

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Exports

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Products made domestically and sold abroad

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Imports

Back 16

Products made abroad and then sold domestically

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Globalization

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The trend in which buying and selling in markets have increasingly crossed national borders

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Gross domestic product

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The measure of the size of total production in an economy

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Market

Back 19

The interaction between potential buyers and sellers; a combination of demand and supply

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Market economy

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An economy where economic decisions are decentralized, resources are owned by private individuals, and businesses supply goods and services based on demand

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Private enterprise

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A system where the means of production are owned and operated by private individuals or groups of private individuals

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Traditional economy

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An economy where things are done as they've always been done

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Underground economy

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A market where the buyers and sellers make transactions in violation of one or more government regulations

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Goods and services market

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A market in which firms are sellers of what they produce and households are buyers

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Allocative efficiency

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When the mix of goods being produced represents the mix that the society most desires

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Budget constraint

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All possible consumption combinations of goods someone afford, given the prices of goods when all income is spent; the boundary of the opportunity set

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Comparative advantage

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When a country can produce a good at a lower cost in terms of other goods; or, when a country has lower opportunity cost of production

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Invisible hand

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Idea that self-interested behavior by individuals can lead to positive social outcomes

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Law of diminishing marginal utility

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The concept in which as we consume more of a good or service, the utility we get from additional units of the good or notrice tend to become smaller than what we recieved from earlier units

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Law of diminishing returns

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The concept in which as additional increments of resources are added to producing a good or service, the marginal benefit from those additional increments will decline

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Marginal analysis

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The examination of decisions on the margin, meaning a little more or less from the status quo

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Normative statement

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A statement of which describes how the world should be

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Opportunity cost

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Measures the cost by what's given up in exchange; it measures the value of the forgone alternative

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Opportunity set

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All possible combinations of consumption that someone can afford given the prices of goods and the individuals income

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Positive statement

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A statement that describes the world as it is

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Production Possibilities Frontier (PPF)

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A diagram that shows the productively efficient combinations of two products that an economy can produce given the resources it had available

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Productive efficiency

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The concept in which it's impossible to produce one or more good or service without decreasing the quantity produced of another good or service

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Sunk costs

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Costs that are made in the past and can't be recovered

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Utility

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Satisfaction, usefulness, or value one obtains from consuming goods and services