Economics Unit 1

Front 1

a social science that studies the choices that individuals, businesses, governments and society make when they cope with scarcity and incentives

Back 1

economics

Front 2

a choice that uses the available resources to the most effective/ satisfying way to fill the wants of the person making the choice

Back 2

rational choice

Front 3

previously incurred costs that are irreversible

Back 3

sunk cost

Front 4

the highest valued alternative we give up to get something else (next valuable alternative)

Back 4

opportunity cost

Front 5

the gain as measured by what you are willing to give up

Back 5

benefits

Front 6

comparing all relevant alternatives (costs and benefits) systematically and incrementally

Back 6

on-the-margin

Front 7

what must be given up to get one more unit of something else (increasing function)

Back 7

marginal cost

Front 8

what you gain from one more unit of something else (decreasing function)

Back 8

marginal benefit

Front 9

a reward/ penalty that encourages/discourages a choice

Back 9

incentive

Front 10

study of choices that individuals and firms make and the way these choices interact in government

Back 10

microeconomics

Front 11

study of aggragate (total) effects of the choices individuals, firms, government make

Back 11

macroeconomics

Front 12

statement about what is (can check with facts)

Back 12

positive

Front 13

statement about what should be (opinion)

Back 13

normative

Front 14

varying one and hold all of the rest constant

Back 14

ceteris paribus (c.p.)

Front 15

just because variables are related has nothing to do with causality

Back 15

correlation vs. causality

Front 16

good and services that are bought by individuals/ households (3 categories)
1. durables
2. non durables
3. services

Back 16

consumption

Front 17

goods and services bought by businesses to increase their productive resources (investment)

Back 17

capital goods

Front 18

resources used to produce all goods and services

Back 18

factors of production

Front 19

getting something with out having to give up anything else (movement inside the ppf)

Back 19

free lunch

Front 20

cost of producing 1 more of something in terms of another product

Back 20

opportunity cost of production

Front 21

producing such that we cannot produce more of a good or service without giving up some of another good or service that is more highly valued

Back 21

allocative efficiency

Front 22

what a person is willing to give up to get one more of something else

Back 22

marginal benefit

Front 23

concentrating on th production of only one good

Back 23

specialization

Front 24

the ability to produce a good using fewer inputs that any other producer

Back 24

absolute advantage

Front 25

ability of person/ country to perform activity or produce a good at a lower opportunity cost that another

Back 25

comparative advantage

Front 26

US firm either produces product in another country or buys finished goods and services from firm located in different country
ex. GM moving production to Mexico

Back 26

off-shoring

Front 27

a firm buys finished goods, component, or service from another firm
ex. advertising companies, prisons, public relations

Back 27

out sourcing

Front 28

firm buys finished goods and services from other firms in another country
ex. call center in India

Back 28

off-shore outsourcing

Front 29

entire relationship between price of good and quantity demanded of good

Back 29

demand

Front 30

amount consumer plans to consume during a given time period at a particular price

Back 30

quantity demanded

Front 31

(all other variables held constant) If price of good rises, quantity demanded of good decreases

Back 31

law of demand

Front 32

a market with many buyers and sellers, none of whom have to ability to influence price

Back 32

competitive market

Front 33

sum of demand of all buyers in the market

Back 33

market demand

Front 34

a good that can be consumed in place of another

Back 34

substitute

Front 35

goods that are consumed together

Back 35

complement

Front 36

5 factors that cause demand to change

Back 36

1. price of related good
2. income
3. expectations
4. number of buyers
5. preferences

Front 37

5 factors that cause supply to change

Back 37

1.prices of related goods
2. prices of inputs and other resources
3. expectations
4. number of sellers
5. productivity

Front 38

when there is a shortage the price will rise, when there is a surplus the price will fall

Back 38

law of market forces