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18 Cards in this Set
- Front
- Back
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What is the science of economics?
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econ- a social science that studies the choices that indiv, bus,gov, that societies make when they cope with scarcity
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What is Scarcity?
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-#1 issue of economics
-the inability to satisfy all wants |
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what does a rational choice involve?
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one that uses available resources most efficiently to satisfy the wants of the person making the choice
--> compare cost and benefits are made on the margin while responding to incentives |
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How do economist measure benefit?
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gain as measured by what you are willing to give up
ex) price. how long did you have to work |
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Opportunity Cost and Sunk Cost
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Opportunity- (most imp.) highest valued alternative we give up to get something else
ex> we give up income for college Sunk- have been previously occured and are irreversible |
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"On the Margin"
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comparing all relevent alternatives systematically and incrementally
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marginal cost
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what you must give up to get one more unit of something
ex> where is opp cost higher, grad or undergrad? grad |
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marginal benefits
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what you gain from getting 1 unit--decreasing function: more you have, less you get incrementally
ex> vacation- 1st few days awesome, but slowly decreases |
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incentives
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rewards that encourage a choice/ penalties that discourage a choice
ex> summer 08' get rid of gas tax |
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positive vs. normative
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positive- a/b what is
normative- a/b what should be oppinion |
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microecon vs. macro econ
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micro- studies every household, good, or market
macro- sum total of econ activity- inflation-gov |
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ceteris paribus
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hold all else constant
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causality and correlation
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correlation does not imply causality
ex> rain positively effects crop growth but does not mean cause |
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consumption
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goods and services bought by individuals and houses
1. durable- tend to last 3 yrs or more (cars) 2. nondurable- use is in consumption ex)paper 70% GDP |
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capital
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bought by businesses to increase productive capacity ex> build factory
14% GDP |
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government goods and services
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federal, state, local gov purchases 20% GDP
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export goods and services
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made in one country and sent to another for consumption
14% GDP higher than usual b/c dollar is cheap compared to other countries |
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4 factors of production
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1. Land- all natural resource
2. Labor- work/time/effort that ppl devote to producing g&s- 154million as of 2008 66% of ppl work who are 18 and able 3. --Human Capital- the knowledge and skill ppl obtain from education/job training/work experience- the more you have the better --capital- equip., machines, factories(what businesses use to produce G&s) 5. entrepreneurship- human resource that organizes land, labor, and capital |
