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35 Cards in this Set
- Front
- Back
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Economics is the study of...
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choices
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Opportunity Cost
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The cost associated with the lost opportunity
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Efficiency
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Minimizing Cost
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Definition of Economics
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the study of scarce resources used to satisfy unlimited wants
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Who came up with the behavioral definition?
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David Friedman
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what is the behavioral definition?
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the study of human behavior given 2 assumptions:
1. people have goals 2. people tend to be rational in pursuit of their goals |
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Needs vs. wants
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Needs - nutrition, O2, H2O, bodily integrity
Wants - everything else |
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Positive
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The technical or scientific side. Can be tested or proven wrong.
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Normative
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Ideas based upon: ethics, personal values, religion, culture, philosophy. Can not be proven wrong.
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Opportunity Cost
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the value of the very best alternative that you did not chose. Sometimes cost=price. More often cost is greater than price.
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Transaction Cost
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cost of searching, getting someplace, value of your time - above and beyond the price.
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3 ways that benefits and/or cost are measured or expressed
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Total, Averages, Margins
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Total
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Adding everything up
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Averages
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Simplicity, statistics, easier to work with
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Margins
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The change in cost and or benefit for the next small step
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Total Net Benefit
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Total Benefit - Total Cost
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Equimarginal Principle for Optimization
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To maximize total net benefit, proceed until the step for which the marginal benefit = marginal cost.
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Factors of Production (resources)
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Land, Labor, Capital, Entrepreneurship
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Define and give the income for the following factor of production:
Land |
Anything nature gave us, Rend
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Define and give the income for the following factor of production:
Labor |
Efforts of people, Wages
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Define and give the income for the following factor of production:
Capital |
Physical objects used in production of goods or services - plant and equipment, physical , not financial
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Define and give the income for the following factor of production:
Entrepreneurship |
No good definition, Profit
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Scarcity
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The result of not enough goods and services to satisfy all wants and needs.
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Value Judgement
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The relative importance one assigns to an action or alternative.
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Equity
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Justice or fairness in the distribution of goods and services.
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Economic Theory
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A formal explanation of the relationship between economic variables.
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Model
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The setting within which an economic theory is presented.
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Assumptions
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Conditions held to be true in a model.
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Econometrics
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The use of statistical techniques to describe the relationships between economic variables.
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Direct Relationship
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2 variables move int he same direction. Graphs as an upward sloping line.
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Inverse Relationship
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Two variables move in opposite directions. Graphs as a downward sloping line.
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Production Possibilities Table
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Gives the various amounts of 2 goods that an economy can produce with full employment and fixed resources and technology.
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Economic Growth
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an increase in an economy's full employment level of output over time.
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Macroeconomics
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The study of the operation of the economy as a whole
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Microeconomics
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The study of individual decision making units and markets within the economy.
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