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18 Cards in this Set
- Front
- Back
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What is the definition of economics? |
Social Science concerned with making efficient choices under scarcity |
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What is an Opportunity Cost? |
What you must sacrifice in order to obtain an alternative |
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4 Principles of Decision Making |
1) Facing Tradeoffs 2) Opportunity cost is present in a tradeoff 3) Rational people weigh marginal cost and marginal benefit 4) People respond to incentives` |
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What is Microeconomics? |
Studies decision making by individuals, workers, businesses, customers, etc. |
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What is Macroeconomics? |
Examines the economy as a whole, or large subdivisions |
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Positive vs Normative Economics |
Positive is based in facts, while Normative deals in opinions of what the economy should be |
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What is a budget line? |
a schedule or curve that shows all possible combinations of 2 goods a consumer can choose at a specific income |
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What are the 4 Scarce Resources? |
Land, Labor, Capital, and Entrepreneurial Ability |
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What is the Production Possibilities Model? |
A model that illustrates production choices a producer can make |
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What are the 3 Economic Questions? |
What gets produced? How is it produced? Who gets it when it has been produced? |
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Describe a command economy and list the 2 existing types |
No private ownership, the factors of production are owned by the government, and all decisions are made centrally by a planning board, Existing examples are Socialism and Communism. |
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What is a Free Market Economy? |
An economic system that allows private ownership of resources, and decision-based markets. Existing examples: US, UK, Japan, Canada, Australia, and Switzerland |
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What are the 9 Characteristics of a Free Market? |
1) Private Property 2) Free choice 3) Self-interest 4) Competition 5) Markets & prices 6) Technology 7) Specialization 8) Use of Money 9) Active but limited government |
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What is the Invisible Hand? |
The theory that the economy can be regulated by individual self interest and voluntary choices, which requires efficiency in production, incentives, and freedom to use and obtain resources |
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What are the 4 components of a Free Enterprise? |
1) Households 2) Businesses 3) Markets 4) Government |
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What are the 6 Main Functions of Government? |
1) Uphold the legal framework 2) Maintain competition 3) Provide public services 4) Regulate spillovers 5) Redistribute income 6) Stabilize the economy during crises |
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What is the Broken Window Fallacy? |
The assumption that money being spent to repair/restore fuels the economy by providing work to a specific field. In actuality this only diverts spending from one field to another. |
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What is Creative Destruction |
Allowing manufacturers of outdated technology to go out of business in order to advance the economy |
