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30 Cards in this Set
- Front
- Back
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What is economics?
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The study of the INDIVIDUAL and the CHOICES they make in the face of SCARCITY.
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Define microeconomics.
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the economic study of narrolwy defined units such as: CONSUMERS, FIRMS, STATES.
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What resources are involved in scarcity?
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Land, labor, capital, and entrepreneurial ability.
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What kind of resource is 'capital'?
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A PHYSICAL resource.
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Human resources are...?
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Physical and mental resources.
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Physical resources are...?
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Buildings and Equipment.
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There are 4 types of economic decision makers. What are they?
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Consumers/households, producers/firms, the government, and the rest of the world.
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What does a product market do?
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Sell goods and services.
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What does a resource market do?
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Sell resources.
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What is an opportunity cost?
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The highest value alternative forgone.
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Why does opportunity cost exist?
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Because of scarcity.
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What is a PPF?
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a curve that shows ALTERNATIVE COMBINATIONS of goods that can be produced when AVAILABLE RESOURCES a are used EFFICIENTLY.
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Name 4 ways in which you can shift the PPF outward?
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Increase in technology, change in resource availability, increase in capital stock (human and physical), and change the rules of the game.
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What is the Law of Comparative Advantage?
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This law states that the individual with the lowest O.C. of producing a particular good should specialize in that good.
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What is absolute advantage?
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When one country can produce something using fewer resources than other producers use.
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What is comparative advantage?
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The ability to make something @ a LOWER OPPORTUNITY COST than other producers can.
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What does 'specialization of labor' allow individuals to do?
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Take advantage of individual preferences, allows workers to develop more experience @ a particular task, reduces the need to shift between tasks, and permits the intoduction of labor saving machinery.
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What is a demand?
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The quantity of a good a consumer is willing and able to purchase.
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What is the Law of Demand?
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the inverse relationship between the price of a good and the quantity demand of that good.
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With income effect you have 2 things. What are they?
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Money income, and real income.
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What is money income?
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The money you get from your job.
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What is real income?
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Your 'buying power' or the money you can actually spend.
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When there is a change in demand what happens to the demand curve?
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The line is shifted up or down.
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When there is a change in QUANTITY demanded what happens?
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There is a movement along the demand curve.
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Name 5 things that shift the demand curve.
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Change in consumer income, prices of other goods, consumer expectations, # of composition of consumers, and consumer taste.
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What is a supply?
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A relation between the price of a good an the quantity of a good producers are willing and able to sell.
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What does the Law of Supply state?
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It states that the amount of a good that producers are willing to sell is directly related to price.
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What changes shift the supply curve?
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Changes in technology, price of relevant resources, price of alternative goods, # of producers, and producer expectations.
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What is a market?
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A set of arrangements between buyers and sellers.
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What are the 2 advantages of a market?
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It reduces transaction costs, and permits equilibrium.
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