Intro To Economics

Front 1

Economics

Back 1

The study of how people make choices in the face of scarcity

Front 2

Scarcity

Back 2

The shortage that exists when less of something is available than is demanded at a price of zero

Front 3

Wants

Back 3

What people would buy if their resources were unlimited

Front 4

Economic Good

Back 4

Any item that is scarce

Front 5

Free Good

Back 5

A good which is not scarce (S > D when Price = 0)

Front 6

Economic Bad

Back 6

Any item which we would pay to have less of

Front 7

Incentives

Back 7

Rewards for engaging in an activity.

Front 8

The factors of production

Back 8

Land, labor, capital, human capital and entrepreneurship

Front 9

Land

Back 9

All natural resources such as timber, minerals, soil and even natural beauty itself

Front 10

Labor

Back 10

The physical service of people--muscle power

Front 11

Capital

Back 11

Tools that are used in production of other goods---these are things we invest in which we do not directly consume

Front 12

Human Capital

Back 12

The mental services of people--education, training, skills

Front 13

Entrepreneurship

Back 13

Organizational and risk taking abililities

Front 14

Rationality Assumption

Back 14

The assumption in economics that people will choose options that make them better off

Front 15

Positive Economics

Back 15

Descriptions of what is

Front 16

Normative Economics

Back 16

Statements about what ought to be (value judgement)

Front 17

Microeconomics

Back 17

The study of econ at the level of the individual or the firm

Front 18

Macroeconomics

Back 18

The study of the economy as a whole

Front 19

Ceteris Paribus Assumption

Back 19

The assumption that nothing changes expect the factor being studied.

Front 20

Economic Model

Back 20

A formal presentation of economic theory

Front 21

Induction

Back 21

Constructing a genreal theory on the basis of observation

Front 22

Deduction

Back 22

Constructing a general theory on the basis of assumptions and logic

Front 23

Opportunity Cost

Back 23

The highest value alternative that must be forgone when a choice is made

Front 24

Tradeoff

Back 24

Giving up one good in order to get another

Front 25

PPC

Back 25

Production Possibility Curve--a graphic representation showing the maximum quantity of goods and services that can be produced using limited resouces to the fullest extent

Front 26

Marginal Opportunity Costs

Back 26

The ammount of one good or service that must be given up to obtain one additional unit o fanother good or service

Front 27

The Law of Increasing Costs

Back 27

That fact that opportunity cost of additional units of a good generally increases as production of more units in attempted. This why the PPC is bowed out.

Front 28

Efficiency

Back 28

When an imput produces the maximum possible output. Or, the situation in which a given output is produced at minimun cost.

Front 29

Marginal Cost

Back 29

Cost of one more unit

Front 30

Marginal Benefit

Back 30

Additional benefit of one more unit.

Front 31

Inefficient Point

Back 31

Not producing to maxmimum potential. (Any point below the PPC.)

Front 32

Absolute Advantage

Back 32

Being able to produce more of a good (or at a lower cost) than someone else.

Front 33

Comparative Advantage

Back 33

The ability to produce a good or service at a lower opportunity cost (relative cost) than someone else.