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27 Cards in this Set
- Front
- Back
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What is ecommics |
Is the study of how people choose to use their limited resources to satisfy their unlimited wants and needs |
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2 important parts of economics |
Dependant upon assumptions Dependant upon simplification |
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3 basic assumptions |
Human beings are rational All societies suffer from scarcity All sellers seek to maximize profit All buyers seek to maximize utility |
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Utility |
Usefulness and satisfaction |
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Factors of production |
Land Labor Capital Entrepreneurship |
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Land |
Also called natural resources Consider them "gifts of natural" such as air, soil, minerals, water, and plants |
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Labor |
Also called human resources Includes physical and mental activities that that go into producing good/services |
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Capital |
Includes tools, machine, building, and technologies |
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Entrepreneurship |
Risk taker who is responsible for combining land, labor, and capital to produce goods and services |
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Prices of... Land Labor Capital Entrepreneurship |
Land is rent Capital is intrest Labor is wages Entrepreneurship is profit |
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What to produce |
Should it be military or civilian goods Food or clothes Medicine or movies |
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How to produce it |
Automated or manual labor Expensive or cheap materials Domestic or overseas labor |
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For whom to produce it |
The wealthy or the needy The sick or the healthy |
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How do we satisfy our economic wants |
We buy goods or services |
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Goods |
A physical object that has been produced for sale Last 3+ years Last up to 3 years |
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Service |
Work done by someone else for which someone is willing to pay |
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How do we make goods and services |
Use factors of production - the productive resources that go into producing goods and services |
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Making choices to deal with scarcity |
People seek to maximize their utility when making decisions. This requires them to consider trade offs |
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Utility |
The satisfaction or benefit a person receives from consuming a good or service |
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Tradeoffs |
The alternate choices people have when making a decision Also the benefits/advantages of making on decision over another |
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Opportunity cost |
When comparing the top 2 choices, it is the benefit of the next best alternative that must be sacrificed to satisfy a want |
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What else influences your choices |
People make decisions based on their marginal utility, or the extra satisfaction they gain from one additional unit of a good/service |
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Law of diminishing marginal utility |
Says that as we get or do more of something, the pleasure we derive from it tends to decrease and so does our willingness to buy it or do it |
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Production possibilities frontier |
Diagram representing the possible combinations of goods and or services an economy can produce when all resources are being fully employed |
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PPF |
We live in a two good world There are fixed resources There is fixed technology |
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The choices nations make |
A nation must choose what to do with its scarce resources during war on periods if military build up Produce military goods or consumer goods |
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Productivity |
A PPF can help us see how efficient our choices are Productivity - measurment of how efficiently we are utilizing our resources |
