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16 Cards in this Set
- Front
- Back
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Key Assumptions in Economics
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-People are rationally self-interested
-People generally make decisions at the margin -Economists hold factors constant, except for what’s being considered |
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Economics
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The study of choices people make to satisfy their needs and wants
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Microeconomics
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The study of how individuals and firms deal with scarcity
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Macroeconomics
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The study of how society as a whole deals with scarcity
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Needs
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Necessities for survival
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Wants
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Goods and services consumed beyond what is necessary for survival
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Goods
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Physical objects that can be purchased
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Services
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Actions or activities performed for a fee
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Producers
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People who supply goods and services
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Consumers
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People who purchase goods and services
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Factors of Production (Resources)
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-Land
Natural resources -Labor Human resources -Capital (a product of Investment) tools, machines, factories -Entrepreneurship |
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Entrepreneurship
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The special ability of risk-takers to combine land, labor and capital in new ways in order to make profit
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The Fundamental Problem of Economics
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Scarcity:
-People have unlimited wants but the resources to satisfy those wants are scarce. -Therefore, we must make choices about how to use our scarce resources. You can use 3c of flour to make a cake or bread. You can't make both, you have to choose. |
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Opportunity Cost
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-Once a resource or factor of production has been put to productive use an opportunity cost is incurred.
-Once you bake the cake, you have lost the opportunity to bake the bread. -No matter what we do we incur opportunity costs |
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TINSTAAFL
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There is no such thing as a free lunch.
-Everything costs something. |
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The Production Possibilities Curve (PPC)
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-a graph showing all of the possible combinations of output for an economy fully employing all of its resources in producing 2 goods
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