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52 Cards in this Set
- Front
- Back
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In the study of economics, people and countries have __________ wants and _________ resources
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limitless/scarce
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Are all tangible things that satisfy people's wants and desires.
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Goods
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Are all intangible but useful activities that are valued by people
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Services
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Land, Machines, Labor, things used to produce goods and services.
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Resources
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Goods and services that are scarce
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Economic goods and services
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The sacrifices that are necessarily associated with making choices are called
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costs
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goods and services that are sufficiently available in quantity, a price f zero, to satisfy all of society's desires for those products
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free goods
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entrepreneurship and management are forms of __________ resources
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human resources
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land, natural resources, and capital are examples of __________ resources
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nonhuman resources
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The knowledge of production methods associated with producing goods and services is called __________
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technology
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the rules that establish and govern the ownership and control of resources are known as _____________
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property
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are the sum total of the traditions, mores, laws, and governmental structure of an economy
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Institutions
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The actual money expenditures associated with any activity are called _______ or ________ costs
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accounting/explicit
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costs are the nonpecuniary costs associated with the consumption of a product
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implicit
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giving up the highest vaued alternative that must be given up in order to produce a good
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opportunity cost
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Post Hoc fallacy
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linking of unrelated events as cause and effect relationship simply because one happens after another
Ex: Rooster crows, sun comes up, rooster causes the sun to rise. |
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Fallacy of Composition
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What is good for you is good for everyone else.
Ex: Standing up at the game is good for you so it's good for everyone else. Except then you all might as well be sitting because you can probably see worse than you would have been able to before. |
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Models
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simplified versions of reality and situations; they do not have to be realistic
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State whether the statement is normative or positive:
"Because we're giving out free stamps, students should start sending more letters." |
Normative
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State whether the following statement is normative or positive:
"Because we raised taxes people are spending less." |
Positive
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Gross National Product (GNP)
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the value of all final good and services produced in an economy in one year
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Making decisions on the margin
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when an individual determines the extra cost AND benefit of a particular action.
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Public Choice
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The economic analysis of political decision making, politics, and the democratic process
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Private Choice
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choices made by individuals in a non-political market that affect only the individual
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inflation
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a sustained increase in the general level of prices or a sustained decrease in the purchasing power of money.
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Implicit Costs
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Non pecuniary costs associated with the consumption of a good or service.
Ex: Skiing weekend; implicit cost is the amount of money the flight attendant would have made had she worked instead of going on vacation. |
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Opportunity Cost =
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Implicit + Explicit costs.
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Rationality Assumption
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You aren't going to do something if you think you will be worse off having done it.
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Marginal Analysis
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A method of finding the optimal, or most desirable, level of any activity--how much coffee to drink, how much bread to produce, and so on.
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Capital Stock
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A supply f items used to produce oher items.
Benefit of capital goods = increased amounts of future consumption, which means you specialize in capital goods, when your ppc shifts outward, it'll be greater than if you specialized in consumer goods. |
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Lisa makes bread in 5 hours and vacuums in 2, Kelly makes bread in 4 hours and vacuums in 3. Who has the absolute advantage in vacuuming and who has the comparative advantage in making bread? Vacuuming?
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Absolute: Lisa
Lisa: 5/2 = 2.5 Bread Lisa: 2/5 = .4 Vacuum Kelly: 4/3 = 1.333 Bread Kelly: 3/4 = .75 vacuum Lisa has CA in Vacuuming, Kelly has CA in Bread |
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Terms of trade
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Number of units of good that exchanges in the market for one unit of the other good.
Ex: # of dinosaurs that trade for a cactus; or # of cacti that trade for a dinosaur |
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exchange cost
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transaction costs, transportation costs, and artificial barriers to trade
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Transaction costs
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All the resource costs (including time associated costs) incurred because of exchange.
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Artificial Barriers to Trade
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Tariff- taxes or levies on imported goods
Quotas- quantity limitations on imports of products |
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Money Price
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Dollar price
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Full Price
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The total opportunity cost, which includes money price + all other costs
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relative price
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the price in relation to the price of some other good or of goods as a whole.
A pair of shoes is put on sale, it's price has dropped relative to other shoes. |
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Factors affecting demand
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income, the price of related goods, price expectations, income expectations, tastes, the number of consumers, and time.
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Rise in Income ____ in demand
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Rise in Demand
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Normal good
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positive relationship exists between consumer income and changes in demand
Opposite is inferior good |
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Prices of Related Goods
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Complements and Substitutes;
If A and B are complements, there is a positive relationship between price of one and demand of the other If A and B are substitutes, they exhibit a negative relationship between their respective demand and price. |
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Market Demand Curve
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the summation of all individual demand schedules at alternative prices for any good or service.
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Factors affecting the supply
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Changes in the cost of production
-change in land, labor, capital, managerial skills, technology, production or marketing techniques |
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Market
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Any area in which demand and supply prices of products or services tend toward equality through the continuous interactions of buyers and sellers
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Perfect Market
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both buyers and sellers are numerous enough that no single buyer or seller can influence the price.
-free entry/exit -perfect competition -law of one price |
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Law of one price
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no one person can sway the market, so if you charge above or below, you'll go out of business, for lack of profit or for lack of business.
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Surplus
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The amount that QS exceeds QD
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Shortage
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The amount that QD exceeds QS
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Price control
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when the government sets a price that is not equilibrium price
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Price Ceiling
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Below equilibrium because that is the highest price that suppliers can charge. Creates a shortage
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Price Floor
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Above equilibrium; is the lowest price suppliers can set, creates a surplus.
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