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38 Cards in this Set

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The science of scarcity; the science of how individuals and societies deal with the fact that wants are greater than the limited resources available to satisfy those wants
economics
the condition in which our wants are greater than the limited resources available to satisfy those wants
scarcity
the study of "what is" in economic matters; can be tested
positive economics
the study of "what should be" in economic matters; cannot be tested
normative economics
branch of economics that deals with human behavior and choices as they relate to relatively small units - an individual, a firm, an industry, a single market
microeconomics
the branch of economics that deals with human behavior and choices as they relate to highly aggregate markets (such as the goods and services market) or the entire economy
macroeconomics
the satisfaction one receives from a good
utility
anything from which individuals receive utility or satisfaction
good
the dissatisfaction on receives from a bad
disultility
anything from which individuals receive disutility or dissatisfaction
bad
all natural resources, such as minerals, forests, water, and unimproved land
land
the physical and mental talents people contribute to the production process
labor
produced goods that can be used as inputs for further production, such as factories, machinery, tools, computers, and buildings
capital
the particular talent that some people have for organizing the resources of land, labor, and capital to produce goods, seek new business opportunities, and develop new ways of doing things
entrepreneurship
a means for deciding who gets what of available resources and goods
rationing device
the most highly valued opportunity or alternative forfeited when a choice is made
opportunity cost
additional benefits, the benefits connected with consuming an additional unit of a good or undertaking one more unit of an activity
marginal benefits
additional costs, the costs connected to consuming an additional unit of a good or undertaking on more unit of an activity
marginal costs
decision making characterized by weighing the additional benefits of a change against the additional costs of a change with respect to current conditions
decisions at the margin
exists when marginal benefits equal marginal costs
efficiency
"all other things constant", "nothing else changes"
ceteris paribus
the erroneous view that what is good or true for the individual is necessarily good or true for the group
fallacy of composition
the value of the entire output produced annually within a country's borders
gross domestic product
represents possible combinations of the two goods that can be produced in a certain period of time, under the conditions of a given state of technology and fully employed resources
PPF, production possiblities frontier
as more of a good is produced, the opportunity costs of producing that good increase
law of increasing opportunity costs
the condition where the maximum output is produced with given resources and technology
productive efficiency
the condition where less than the maximum output is produced with given resources and technology
productive inefficiency
before trade
ex ante
after trade
ex post
how much of one thing is given up for how much of something else
terms of trade
the costs associated with the time and effort needed to search out, negotiate, and consummate an exchange
transaction costs
the situation where someone can produce a good at lower opportunity cost than someone else can
comparitive advantage
the way in which society decides to answer key economic questions - those relating to production and trade in particular
economic system
3 questions of economic system that relate to production:
what goods will be produced?
how will they be produced?
for whom will the goods be produced?
2 questions of economic system relating to trade:
what is the nature of trade?
what function do prices serve?
economic system characterized by largely private ownership of factors of production, market allocation of resources, and decentralized decision making. economic activity takes place in the private sector, but government plays a substantial economic and regulatory role.
mixed capitalism
the willingness and ability of buyers to purchase different quantities of a good at different prices during a specific time period
demand
as the price of a good rises, the quantity demanded of the good falls, vice-versa, ceteris paribus
law of demand