Microeconomics

Front 1

Opportunity Cost

Back 1

The full value of the best alternative that is given up or forgone

Front 2

The Productive Resources

Back 2

Labor, capital, land, entrepreneurship

Front 3

The three basic economic questions

Back 3

What goods and services will be produced and in what quantities?

How will they be produced (what methods of production and combination of inputs will be used)?

For whom will they be produced (who gets what share of the goods and services)?

Front 4

Comparative Economic Systems

Back 4

The study of the different ways of organizing economic activity, or answering the three basic economic questions

Front 5

Traditional Economy

Back 5

Answers the basic economic questions by traditions or custom. The answers are determined by how the questions have been answered in the past.

Front 6

A Command Economy

Back 6

Also known as a planned economy. This economy answers the basic economic questions through central command and control. A central planning authority makes all decisions regarding what and how to produce.

Front 7

A Market Economy

Back 7

Relies on incentives and the self-interested behavior of individuals to direct production and consumption through market exchanges. Consumers "voting" with their dollars and determine what is produced. The result of this market process determines what goods and services are available.

Front 8

How to Calculate Opportunity Cost

Back 8

If there are two goods X and Y, then

Opportunity Cost of X=Amount of X Gained ÷ Amount of Y Given Up

Front 9

Goods

Back 9

Objects that people value

Front 10

Services

Back 10

Tasks performed for people

Front 11

Labor

Back 11

The resource of production that involves physical and mental work of human beings

Front 12

Wages

Back 12

The payment labor receives for its productive services

Front 13

Human Capital

Back 13

Knowledge and skills that increase labor's productivity. A large part of wage differences .ca be explained by differences in human capital

Front 14

Land

Back 14

To an economist, land is not just rocks and soil, but all natural resources that can be used as inputs to production.

Front 15

Rent

Back 15

The income paid to land as a factor of production

Front 16

Capital

Back 16

All aids to production that are human creatures rather than resources found in nature. Includes tools, factories, warehouses, and inventories. Capital, like land, receives a flow of income

Front 17

Interest

Back 17

The payments to capital. A reward for giving up present consumption in order to make resources available for the creation of more capital for future production.

Front 18

Investment

Back 18

The act of adding to capital

Front 19

Entrepreneurship

Back 19

Consists of the activities of combing the other productive resources to produce goods and services, taking risks, and introducing new methods and new products (innovation). Entrepreneurs combine other resources by buying or renting them to produce a saleable product.

Front 20

Profit

Back 20

The reward for innovation, risk taking, and organization of entrepreneurship

Front 21

Specialization

Back 21

Also known as the division of labor. This means that individuals will produce more than they intend to consume of one or more items and will trade the excess for other things they want. The benefits require that people or nation's engage in exchange.

Front 22

The Principle of Comparative Advantage

Back 22

Each person, group, or country should specialize in a product or service for which the opportunity cost of production is lowest

Front 23

Scarcity involves _____ wants and _____ resources.

Back 23

Scarcity involves unlimited wants and limited resources.

Front 24

Which is a macroeconomics issue?

The number of new cars produced

The price of cellphones

The growth of total output

Unemployment in the steel industry

Back 24

The growth of total output. Macroeconomics is concerned with the aggregate or total effect, determined by adding across many markets

Front 25

True or False:

A production possibilities curve shows that in order to acquire more of one good, some of the alternative good must be given up.

Back 25

True

Front 26

True or false:

Opportunity Cost has a direct relationship to comparative advantage.

Back 26

False. Opportunity cost has an inverse relationship to comparative advantage. Comparative advantage is greatest for a product when the opportunity cost of production is lowest for that product.

Front 27

What will cause the production possibilities curve to shift to the right (away from the origin)?

Back 27

Economic growth

Front 28

Ceteris Paribus

Back 28

All else being equal/If everything else remained constant

Front 29

The law of demand states that, ceteris paribus, an increase in price causes the quantity demanded to _________

Back 29

Decrease

Front 30

A decrease in demand means less demand at every price and it would shift the demand curve to the _______

Back 30

Left

Front 31

Movements along the demand curve are caused by:

Back 31

Changes in quantity demanded, caused soley by a change in the price of the good

Front 32

Changes or shifts of the demand curve are:

Back 32

Changes in demand caused by nonprice demand conditions

Front 33

The nonprice determinants of demand are:

Back 33

The taste of the group demanding the good or service

The size of the group demanding the good or service

The income and wealth of the group demanding the good or service

The prices of other goods and services

Expectations about future prices or income

Front 34

How is the market demand curve determined?

Back 34

By adding the individual demand curves

Front 35

A normal good

Back 35

A good for which demand increases as income decreases