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35 Cards in this Set
- Front
- Back
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Scarcity and Choice
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Two essential ingredients of an economic topic
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Why are goods scarce?
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Because the desire for them far exceeds the availability from nature
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History
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A record of struggle to transform available, but limited resources into scarce goods; things we would like to have
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Absence of poverty
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Implies some basic level of need that has been met
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Absence of scarcity
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Would imply that all of our desires for goods are fully satisfied
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What is used in market setting as rationing?
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Price is used to ration goods and resources
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Rationed goods by price
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When price is used to ration goods, people have a strong incentive to earn income so they will be able to pay the required price
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Competition
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the natural out growth of the need to ration scarce goods
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Increased scarce good
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Someone must give up something if we are to have more of a scarce good
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Economizing
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Gaining a specific benefit at the least possible cost
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Desireability
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The value of a good is subjective and varies with individual preferences; valence
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How is an economic theory tested?
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The test of an economic theory is its ability to predict and explain events in the real world
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Positive Economics
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What is; the scientific study of what is among economic relationship; can be proved as either false or true
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Normative Economics
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Judgment about 'what ought to be' in economic matters; reflect subjective values cannot prove true or false
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True or False
Good intentions guarantee good results |
False
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True or False
Positive economic statements can be proven to be true |
True (positive economic statements)
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True or False
Ceteris Paribas is a term that means "what will be will be" |
False, means 'other things constant'
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True or False
High corn prices result in less corn being purchased is normative |
False, this is positive economics
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True or False
Utility is another name for marginal cost |
False, Utility is subjective benefit or satisfaction a person expects from a choice or course of action
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True or False
Jay is economizing, this is a way of reducing cost |
True
Economizing=Reducing cost |
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Violating Ceter Paribus
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When describing the effect of a change, the outcome may be influenced by changes in other things
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Good Intentions
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Will no guarantee desirable outcomes; an unsound proposal will lead to undesirable outcomes even if it is supported by proponents
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Fallacy of Composition
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The erroneous view that what is true for individual(or part) is also true for the group (whole)
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Correlation
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Mathematical relationship;
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Opportunity Cost
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The highest valued activity sacrificed in making a choice
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Mutual Gain
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Foundation of trade; value can be created by exchanges that move goods to individual who value them more
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Transaction Costs
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The time, effort, and other resources needed to search out, negotiate, and consumed
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Middleman
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Person who buys, sells, or arranges trades and reduce transaction cost
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Property Rights
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To use, control, and obtain benefits from a resource, good, or service
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Private Property Rights
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the right to exclusive use, legal protection against invaders, the right to transfer to another
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Who is the economist who came up with the idea of comparable advantage
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David Ricardo
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True or False
Tariffs are taxes paid on imported goods |
True
Tariffs |
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True or False
The pin making example is an example of division of labor. |
True
Pin Making |
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True or False
Comparative advantage is not the same as division of labor |
True
comparative advantage |
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True or False
Can have a comparative advantage without an absolute advantage |
True
Comparative w/o Absolute |
