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16 Cards in this Set
- Front
- Back
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Economy
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a system for coordinating society's productive activity
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Market economy
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an economy in which decisions about production and consumption are made by individual producers and consumers
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Invisible hand (adam Smith)
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the individual pursuit of self-interest can lead to good results for society as a whole
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Economics
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is the study of economies, at the level of both individuals and of society as a whole
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Microeconomics
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the branch of economics that studies how people make decisions and how the decisions intereact
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Macroeconomics
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the branch of economics that is conerned with overall ups and downs in the economy
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Positive economics
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the branch of economic analysis that describes the economy actually works
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Normative Economics
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the branch of economics that makes persriptions about the way the economy should work
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Scarcity Principle
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the available quanitity of resource is not large enough to satisfy all productive uses
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Opportunity cost principle
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what you must give up in order to obtain
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Rationality principle
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the more the better
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Principles underlying interaction of individual choices
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- gains from trade
- markets move toward equilibrium - as efficient as possible when using resources - markets usually lead to efficiency - when markets don't achieve efficiency, government intervention can improve society's welfare |
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a model is
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a simplified representation of a real situation that's used to better understand real-life situations
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PPF (production possibility frontier)
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illustrates the trade facing an economy that produces only two goods. It shows the maximum quantity of one good that can be produced for any given production year.
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comparative advantage
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the opportunity cost of producing the good is lower for that individual than for other people
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absolute advantage
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he/she can do it better than other people
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