Econ Test 1

Front 1

Normative Statement

Back 1

-opinion
-"what should be"

Front 2

Positive Statement

Back 2

-supported or rejected by evidence
-"what is"

Front 3

Predicting Individual Behavior

Back 3

difficult to predict
-random actions of individuals (offset one another)

Front 4

Predicting Group Behavior

Back 4

predicted more accurately

Front 5

Economics

Back 5

how people use scarce resources to satisfy unlimited wants

Front 6

Resources

Back 6

inputs; factors of production used to produce goods and services
-labor, capitol, natural resources, and entrepreneurial ability

Front 7

Labor

Back 7

human effort
-physical or mental
time: a fundamental resource of labor

Front 8

Capital

Back 8

human creations
-physical: factories, tools, machines
-human: knowledge and skill
payment

Front 9

Resources

Back 9

natural: gifts of nature
-renewable or exhaustable
entrepreneurial: talent ideas, risk of operation

Front 10

Goods

Back 10

Intangible, scarce good/ service
-the amount desired exceeds the amoung available at a zero price

Front 11

Households

Back 11

Consumers
-demand goods and services
Resource owners
-supply resources

Front 12

Firms/Goverments/Rest of the World

Back 12

demand resources, supply goods and services

Front 13

Economic Theory/Model

Back 13

Simplification of economic reality
-important elements of the problem
-make predictions about the real world

Front 14

Good Theory

Back 14

-guide
-sort, save, and understand information

Front 15

Scientific Method

Back 15

1. Identify Question
2. Specify Assumptions
3. Formulate Hypothesis
4. Test Hypothesis -- evidence

Front 16

Scarcity

Back 16

occurs when the amount people desire exceeds the amount available at 0 price

Front 17

Opportunity Cost

Back 17

the value of the best alternative forgone

Front 18

Sunk Cost

Back 18

incurred cost, cannot be recovered, ignored when making economic choices
(irrelevant)

Front 19

Law of Comparative Advantage

Back 19

"the individual with the lower opportunity cost of producing on out put should specialize in producing that output

Front 20

Barter

Back 20

trade products for other products
-best in simple economies

Front 21

Money

Back 21

medium of exchange
-facilitating exchange

Front 22

Division of Labor

Back 22

Specialization; increase productivity

Front 23

Production and Possibilities Frontier (PPF)

Back 23

how much an economy can produce w/ the resources available

Front 24

Economic Systems

Back 24

Criteria
-ownership of resources
-allocation of resources
-incentives
(capitalism-communism)

Front 25

Pure Capitilism

Back 25

-private property rights
-unrestricted markers
-adam smith "invisible hand"

Front 26

Pure Command System

Back 26

-public ownership of property
-government planners

Front 27

Mixed and Transitional Economies

Back 27

-increasing role of both governments and markets
-mixed economies

Front 28

Household

Back 28

maximize utility, level of satisfaction or happiness

Front 29

Firm

Back 29

maximize profit

Front 30

Sole Proprietorship

Back 30

single owner, all profit and unlimited liability

Front 31

Corporation

Back 31

legal entity owned. liability is limited to their share of stock

Front 32

Partnership

Back 32

multiple owners, share profit and unlimited liability

Front 33

Cooperatives

Back 33

a group of people who cooperate by pooling their resources to buy and sell more efficiently

Front 34

Non-for-profit organizations

Back 34

groups that do not pursue profit as a goal

Front 35

Government

Back 35

promote competition, regulate natural monopolies, establish and enforce rules of the game

Front 36

Externalities

Back 36

a cost or benefit that falls on a third party

Front 37

Demand

Back 37

quantity consumers are willing and ble to buy at each possible price during a given time period

Front 38

Law of demand

Back 38

quantity demanded varies inversely w/ price other things constant

Front 39

Substitution Effect

Back 39

when the price falls, more willing to purchase
-consumers more willing to substitute that good for others

Front 40

Income Effect

Back 40

a fall in the price of good, increases real income and the ability to purchase

Front 41

Law of supply

Back 41

quantity supplied is directly related to its price, other things constant

Front 42

Inferior Goods

Back 42

negative income elasticity

Front 43

Normal Goods

Back 43

positive income elasticity