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67 Cards in this Set
- Front
- Back
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Economics |
The study of the allocation of our scarce resources to satisfy our unlimited wants why did the indust. explosion occur |
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Scarce resources |
Inputs used to produce goods and services (labour,land, capital, entrepreneurship) |
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Microeconomics |
The study of the smaller units within the economy |
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Economic theories |
Statements or propositions about patterns of human(economic) behaviour that are expected to take place under certain circumstances |
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Hypothesis |
A testable proposition about how people will behave or react to a change in economic circumstances |
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Cerberus paribus |
"Holding everything else constant" -isolating a variable to assess its effect |
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Correlation |
Events that usually occur together |
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Causation |
One event causes the other to occur |
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Fallacy of composition |
The incorrect view that what is true for the individual is also true for the group |
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Positive analysis |
An objective, value-free, testable statement |
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Normative analysis |
A subjective, non-testable item about what SHOULD BE (involves judgments and opinions) |
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Scarcity |
Our wants exceed our limited resources |
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4 types of scarce resources used for the production of goods and services |
Labour, land, capital, entrepreneurship |
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Marginal thinking |
Involves focusing on the additional, or incremental choices |
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Positive incentives |
Either reduce cost or increase benefits, resulting in an increase in the activity or behaviour |
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Negative incentives |
Either increase costs or reduce benefits, resulting in a decrease in the activity or behaviour |
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Specialization |
Concentrating on the production of one, or a few, goods |
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Market economy |
Uses the private decisions of consumers, input suppliers, and firms |
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Command economy |
Uses central planning to coordinate most economic activities |
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Mixed economy |
Combines elements of market and command economies to allocate goods and services |
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Consumer sovereignty |
How consumers vote on economic affairs with their money in a market economy |
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Labour-intesive |
Production method that used a large amount of labour |
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Capital-intensive |
Production method that uses a large amount of capital |
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Production possibilities curve |
Shows potential total output combinations of any two goods for an economy given existing levels of resources and technology |
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Efficiency |
Getting the most from society's scarce resources |
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Increasing opportunity costsmarket |
The opportunity cost of producing a product increases as more of that product is produced |
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Market |
The process of buyers and sellers exchanging goods and services |
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Market failure |
Occurs when the economy fails to allocate resources efficiently in its own |
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Product markets |
Are the markets for consumer goods and services Households are buyers, firms are sellers |
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Factor (input) markets |
The markets where households sell their factors of production to firms (capital, land, labour, entrepreneurship) |
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The goods and services flow |
The continuous flow of inputs and outputs in an economy |
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Income flow |
The continuous flow of income and spending in an economy |
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Diminishing marginal utility |
The concept that in a given time period, an individual will receive less satisfaction from each successive unit of a good consumed |
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Substitution effect |
At higher prices, buyers increasingly substitute other goods for the good that now had a higher relative price |
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Income effect |
At higher prices, buyers feel poorer, causing lower quantity demanded |
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Individual demand schedule |
A table that shows the relationship between the price f the good and the quantity demanded |
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Individual demand curve |
A graphical representation that shows the inverse relationship between price and quantity demanded |
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Market demand curve |
A horizontal summation of individual demand curves |
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Change in quantity demanded |
Caused by a change in the price of the good (slides along the line) |
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Change in demand |
Caused by. Change in a determinant of demand (move of the entire line) |
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Substitutes |
Goods that are consumed in palace of each other |
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Complements |
Goods that go together |
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Normal good |
It is normal if an increas in income causes an increase in demand |
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Inferior goods |
It is inferior if an increase in income leads to a decrease in demand |
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Law of supply |
The quantity of a good or service supplied varies directly with its price |
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Individual supply curve |
A graphical representation of the relationship between price and quantity supplied |
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Market supply curve |
Horizontally sums up the supply curves of many producers |
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Change in quantity supplied |
Caused by a change in the price of the good (moves along the line) |
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Change in supply |
Caused by a change in another factor that can affect supply behaviour (moves the entire line) |
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Input prices |
-higher ones increase the cost of production and lowers profitability, moving the curve to the left -lower ones decrease the cost of production and increases profitability, moving the curve to the righf |
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Expectations |
If producers expect a higher price in the future they will supply less now then they would have |
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Determinants of supply |
Expectations, technology, number of suppliers, regulation(government), taxes and subsidies, weather |
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Comparative advantage |
Occurs when a person or a country can produce a good or service at a lower opportunity cost than others can |
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Law of increasing opportunity cost |
As more of one item is produced by an economy, the opportunity cost of additional units of that product rises |
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Why are observations and predictions harder in the social sciences? |
-they often involve looking at human behaviour -more variable and less predictable expiraments |
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Why are observations and predictions harder in the social sciences? |
-they often involve looking at human behaviour -more variable and less predictable expiraments |
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The economic problem |
-Scarcity forces us to make choices -choices are costly because we must give up other opportunities that we value |
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Why are observations and predictions harder in the social sciences? |
-they often involve looking at human behaviour -more variable and less predictable expiraments |
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The economic problem |
-Scarcity forces us to make choices -choices are costly because we must give up other opportunities that we value |
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Advantages of specialization |
-greater skill through repetition -avoid wasting time from switching tasks -promote the use of specialized equipment |
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Why are observations and predictions harder in the social sciences? |
-they often involve looking at human behaviour -more variable and less predictable expiraments |
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The economic problem |
-Scarcity forces us to make choices -choices are costly because we must give up other opportunities that we value |
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Advantages of specialization |
-greater skill through repetition -avoid wasting time from switching tasks -promote the use of specialized equipment |
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Specialization and trade |
Increase wealth by allowing a person, a region, or a nation to specialize in those products that it produces at a lower opportunity cost and to trade those products for ones that others produce at a lower opportunity cost |
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Buyers tastes |
Changes in consumers taste Leeds to change in preference and demand |
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200-250 years ago |
lower income levels and life expect. 35 y/o life expt, poor dental care, labor 1/6 died, child 1 in 4 died before 1st bday, thresh on floor (board to keep straw in) Economic explosion - then indust age |
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why people got richer 200 years ago |
people content mid 18 cent- richer/preferences change population increase consuming increase |
