Economics Chapter 1

Front 1

The social science concerned with how individuals, institutions, and society make optimal (best) choices under conditions of scarcity.

Back 1

Economics

Front 2

Goods and services are produced using resources, which are A)________ and have B)_________ ____.

Back 2

A) scarce
B) alternate uses

Front 3

Human wants for goods and services are either a)___________ or b) _______________

Back 3

a) insatiable
b) recur

Front 4

Key features of the economic perspective are:

Back 4

a) scarcity and choice
b) purposeful behavior
c) marginal analysis

Front 5

limited goods and services that restrict options and demands choices b/c we can't have it all we must decide what we will have and what we must forgo.

Back 5

scarce economic resources

Front 6

-to obtain more of one thing, society forgoes the opportunity of getting the next best thing.
-It is the value of the next best alternative use of a resource

Back 6

Opportunity costs

Front 7

"There is no free lunch." means:

Back 7

if productive resources are used in the making of a good or service then it is never "free"

Front 8

the pleasure, happiness, or satisfaction obtained from consuming a good or service

Back 8

utility

Front 9

-human beings always strive to be better off by making choices
-they would never knowingly make choices which leave them worse off

Back 9

Rational self-interest

Front 10

means extra, additional, or change in

Back 10

marginal

Front 11

comparison of marginal benefit and marginal cost

Back 11

so long as the marginal benefit exceeds the marginal cost of a choice/decision, that choice is implemented

Front 12

Economics relies on the scientific method and the following elements:

Back 12

-observing real-world behavior and outcomes
-based on those observations, formulating a possible explanation of cause and effect (hypothesis)
-testing this explanation by comparing the outcomes of specific events to the outcome predicted by the hypothesis
-accepting, rejecting, and modifying the hypothesis, based on these comparisons
-continuing to test the hypothesis against the facts. If favorable results accumulate, the hypothesis evolves into a theory

Front 13

a very well-tested and widely accepted theory is referred to as an :

Back 13

economic law or economic principle

Front 14

a statement about economic behavior or the economy that enables prediction of the probably effects of certain actions

Back 14

economic principle

Front 15

extremely important in economics to make any meaningful inference

Back 15

ceteris paribus

Front 16

-backbone of most economic models
-many economic models are expressed graphically

Back 16

graphical expression

Front 17

-concerned with the aggregate or the whole economy or its basic subdivisions such as the gov't, household, and business sectors

Back 17

macroeconomics

Front 18

is a collection of specific economic units treated as if they were one unit

Back 18

aggregate

Front 19

-concerned with individual units in the economy like the consumers, firms, industry

Back 19

microeconomics

Front 20

-focuses on facts and cause-and-effect relationships
-includes description, theory development, and theory testing
-avoids value judgments
-tries to establish scientific statements about economic behavior and deals with what the economy is actually like
WHAT IS STATEMENT: IF TUITION FOR COLLEGE GOES UP, LESS STUDENTS WILL ENROLL (CENTERIS PARIBUS)

Back 20

positive economics

Front 21

-economic policy involves this which incorporates value judgments about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal.
-looks at the desirability of certain aspects of the economy.
WHAT OUTGHT TO/SHOULD BE STATEMENTS: THE COLLEGE SHOULD TAKE STEPS TO REDUCE TUITION.

Back 21

normative economics

Front 22

-the need to make choices because economic wants exceed economic means

Back 22

economizing problem

Front 23

examples of individual's economizing problem:

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-limited income
-unlimited wants
-a budget line
-tradeoffs & opportunity costs
-make best choice possible
-change in income

Front 24

scarce resources

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-land (all natural resources)
-labor (all human effort)
-capital (all man made resources)
-entrepreneurial ability (bringing all the other resources together for production)

Front 25

-resources are also called
-"inputs"

Back 25

factors of production

Front 26

Production Possibilities Model Assumptions:

Back 26

-full employment
-fixed resources
-fixed technology
-two goods

Front 27

the economy is employing all of its available resources

Back 27

full employment

Front 28

the quantity and quality of the factors of production are fixed

Back 28

fixed resources

Front 29

The state of technology (the methods used to produce output) is constant

Back 29

fixed technology

Front 30

the economy is producing only two goods: pizzas and industrial robots. Pizzas symbolize consumer goods, products that satisfy our wants directly; industrial robots symbolize capital goods, products that satisfy our wants indirectly by making possible more efficient production of consumer goods

Back 30

two goods

Front 31

unemployment in PPC Model:

Back 31

-any point inside the curve indicates unemployment or underemployment
-more goods and services can be produced with the existing resources and technology
-This is indicated by a move towards the PPC