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33 Cards in this Set

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What is Economics?
The study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society. - Key word is "Coordination"
What are the three central problems facing an economy when referring to "coordination"?
1. What and how much to produce.
2. How to produce it.
3. For whom to produce it.
What is Scarcity?
The goods available are too few to satisfy individual' desires.
What is Deduction?
A method of reasoning in which one deduces a theory based on a set of almost self-evident principles.
What is Induction?
A method of reasoning in which one develops general principles by looking for patterns in the data.
What is Economic Reasoning?
It is making decisions on the basis of costs and benefits.
What does the acronym TANSTAAFL stand for?
There Ain't No Such Thing As A Free Lunch - Economic knowledge summarized into one sentence.
What is Marginal Cost?
The additional cost to you over and above the costs you have already incurred
What is Sunk Cost?
The costs that have already been incurred and cannot be recovered
What is Marginal Benefit?
The additional benefit above what you've already derived.
What is the Economic Decision Rule?
If the marginal benefits of doing something exceed the marginal costs, do it.

If the marginal costs of doing something exceed the marginal benefits, don't do it.
What is Opportunity Cost?
The benefit that you might have gained from choosing the next best alternative.
What are Economic and Market Forces?
An Economic force is the necessary reactions to scarcity, for example rationing mechanisms such as the price on food.

A Market force is an economic force that is given relatively free rein by society to work through the market. For example, when there is a shortage of a product, the price goes up. If there is surplus, the price goes down.
What is Abduction?
A method of analysis that uses a combination of inductive and deductive methods. Modern Economics is a abductive science.
What is Economic Model and Economic Principle?
A framework that places the generalized insights of the theory in a more specific contextual setting.

A commonly held economic insight stated as a law or general assumption.
What is the Invisible Hand Theorem?
It is the idea that when the quantity supplied is greater than the quantity demanded, price has a tendency to fall. Whereas when the quantity demanded is greater than the quantity supplied, price has a tendency to rise.

In short, a market economy, through the price mechanism, will tend to allocate resources efficiently.
What is Efficiency?
Achieving a goal as cheaply as possible.
What is Microeconomics?
The study of individual choice, and how that choice is influenced by economic forces. (Studying such things as pricing policies of firms, households' decisions on what to by, and how markets allocate resources among alternative ends.
What is Macroeconomics?
The study of the economy as a whole. It considers the problems of inflation, unemployment, business cycles, and growth.
What is an Economic Policy?
Actions or inactions taken by the government to influence economic actions.
What is Positive Economics?
The study of what is, and how the economy works.
What is Normative Economics?
The study of what the goals of the economy should be.
What is the Art of Economics
Also known as Political Economics, it is the application of the knowledge learned in positive economics to the achievement of the goals one has determined in normative economics.
What does PPC stand for and what is it?
Production Possibilities Curve and it measures the maximum combination of outputs that can be obtained from a given number of inputs.
What is a Production Possibilities Model or table?
A table that lists a choice's opportunity costs by summarizing what alternative outputs you can achieve with your inputs.
What does the Principle of Increasing Marginal Opportunity Cost?
It states that in order to get more of something, one must give up ever-increasing quantities of something else.
What is the shape with respect to the PPC?
The production possibility curve is downward sloping. Most are outward bowed because of increasing marginal opportunity cost; if opportunity cost doesn't change, the production possibility curve is a straight line.
What is the shift with respect to the PPC?
Increases in inputs or increases in the productivity of inputs shift the production possibility curve out. Decreases have the opposite effect; the production possibility curve shifts along the axis whose input is changing.
What does it mean when the points on in, out, or on?
Points inside the PPC are points of inefficiency, points on the PPC are points of efficiency, and points outside the PPC are not obtainable.
What is Productive Efficiency?
Achieving gas much output as possible from a given amount of inputs or resources
What is Laissez-Faire?
An economic policy of leaving coordination of individual's actions to market. It is a French term that means "Let events take their course; Leave things alone.
What is Outsourcing?
The relocation of production once done in the US to foreign countries
What is Globalization?
Broader than outsourcing and means the increasing integration of economies, cultures, and institutions across the world.