Macro Econ Chapter 1

Front 1

scarce

Back 1

not freely available. when price exceeds 0

Front 2

economics

Back 2

examines how people use their scarce resources to satisfy their unlimited wants

Front 3

resources

Back 3

inputs used to produce the goods and services that people want

Front 4

4 categories of resources

Back 4

labor
capital
natural resources
entrpreneurial ability

Front 5

labor

Back 5

human effor, mental and physical
Payment: wage

Front 6

capital

Back 6

all human creations used to produce goods and services
payment: interest
physical and human capital

Front 7

physical capital

Back 7

factories, tools, machines, computers, etc. human creations used to produce goods and services

Front 8

human capital

Back 8

consists of the knowledge and skill people acquire to increase their productivity

Front 9

natural resources

Back 9

all gifts of nature. water, trees, oil reserves, etc
payment: rent
renewable and exhaustable resources

Front 10

renewable resource

Back 10

can be drawn on indefinitely if used right

Front 11

exhaustable resource

Back 11

does not renew itself and only available in limited amounts.

Front 12

entrepreneurial ability

Back 12

talent required to dream up a new product or find a better way to produce an existing one

Front 13

entrepreneur

Back 13

profit-seeking decision make who starts with an idea, organizes an enterprise to bring that idea to life and then assumes the risk of operation

Front 14

profit

Back 14

equals revenue from items sold minus cost of resources employed to make those items.

Front 15

good

Back 15

tangible product used to satisfy human wants

Front 16

service

Back 16

an activity, or intangible product, used to satisfy human wants.

Front 17

scarcity

Back 17

occurs when the amount people desire exceeds the amount available at a 0 price

Front 18

bads

Back 18

things we want none of, even at a 0 price

Front 19

4 types of decision makers in the economy

Back 19

households, firms, governments, rest of the world

Front 20

markets

Back 20

means by which buyers and sellers carry out exchange

Front 21

product market

Back 21

a market where a good or service is bought and sold

Front 22

resource market

Back 22

market where a resource is bought and sold

Front 23

circular-flow model

Back 23

diagram that traves the flow of resources, products, income, and revenue among economic decision makers. focuses on primary interaction in a market econ.

Front 24

rational

Back 24

economists mean tht ppl try to make the best choices they can, given the available time and info

Front 25

rational self-interest

Back 25

each individual tries to max the expected benefit achieved with a given cost or to minimize the expected cost of achieving a given benefit

Front 26

marginal

Back 26

incremental, additional or extra; used to describe a change in an economic variable

Front 27

microeconomics

Back 27

examines individual economic choices and how markets coordinate the choices of various decision makers.

Front 28

macroeconomics

Back 28

study of economic behavior of entire economies

Front 29

recessions

Back 29

a decline in production, employment and other aggregate measures

Front 30

economic fluctuations

Back 30

rise and fall of economic activity relative to the long-term growth trend of the economy

Front 31

economic theory/model

Back 31

a simplification of reality used to make predictions abt cause and effect in the real world

Front 32

scientific method

Back 32

1. identify the question and define relevant variables
2. specify assumptions
3.formulate a hypothesis
4. test the hypothesis

Front 33

variable

Back 33

a measure that can take on different values at different times

Front 34

other-things constant assumption

Back 34

assumtion tht other variable remain unchanged.

Front 35

behavioral assumptions

Back 35

assumption tht describes the expected behavior of economic decision makers, what motivates them

Front 36

hypothesis

Back 36

theory abt how key variable relate

Front 37

positive econ statement

Back 37

a statement that can be proven or disproven by reference to facts.

what is

Front 38

normative econ statement

Back 38

reflects and opinion tht can't be proven or disproven.

what shld be

Front 39

fallacy tht association is causation

Back 39

the incorrect idea tht if 2 variables are associated in time, one must necessarily cause the other

Front 40

fallacy of composition

Back 40

incorrect beliefe tht wht is true for the individual must necessarily be true for the whole

Front 41

secondary effects

Back 41

unintended consequences of economic actions that may develop slowly over time as people react to events.

Front 42

pitfalls of faulty economic analysis

Back 42

1. fallacy tht association is causation
2. fallacy of composition
3. ignoring secondary effects