Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
22 Cards in this Set
- Front
- Back
absolute advantage
|
A situation in which a person/country can produce more of a particular product from a specific quantity of resources than another person/country
Ex: With X resources, Mary can produce 3 hats and Jane can produce 9 hats. Jane should produce hats. |
|
bowed out ppf
|
Law of increasing opportunity costs causes this, because as more of one good is produced, the steeper the slope of the PPF as more other the other good is sacrificed
Ex: |
|
command economy
|
A method of organizing an economy in which property resources are publicly owned and government directs the economy
Ex: Communism |
|
comparative advantage
|
A situation in which a country/person can produce a specific product at a lower opportunity cost than another country/person, the basis for specialization/trade
Ex: Susy only has to give up 3 units of corn to produce 1 computer, while Mark has to give up 5 units of corn for 1 computer. Susy should produce the computers. |
|
constant cost
|
constant opportunity cost--an opportunity cost that remains the same for each additional unit, resulting in a straight-line PPC
Ex: |
|
cost
|
the expense incurred to consume a good, must include implict and explicit costs
Ex: Cost to start business= Costs to buy building, hire employees, etc + opportunity costs of entrepreneur NOT working at his old job |
|
economic efficiency
|
The use of the minimum necessary resources to obtain socially optimal amounts of goods and services, on PPC
Ex: Productive and Allocative efficiency at the same time |
|
economic growth
|
An outward shift in the PPC or increase of GDP due to an increase in resource supplies/quality or technology
Ex: Assembly line enabled economic growth in the automobile industry. |
|
increasing cost
|
opportunity costs increase as more of a good is produced because resources must be shifted from more suitable uses to less suitable uses
Ex: Land can be used to make the inputs for pizza, but at some point, the opportunity costs of making pizza go up because the land would be better used growing corn. |
|
marginal cost
|
The additional cost of producing 1 more unit of output, Total Cost/Change in Output
Ex: Produce one more pair of shoes--> add $5 to total cost |
|
market economy
|
An economy in which the private decisions of consumers, resource suppliers, and firms determine how resources are allocated
Ex: Susy and her friends purchase all of Edwin's posters, so he buys more posters from his supplier, John, to keep up with demand. |
|
normative statements
|
Value judgments about what the economy SHOULD be like
Ex: The Fed should lower interest rates to boost investment. |
|
opportunity cost
|
The amount of other products that must be forgone or sacrificed to produce a unit of a product.
Ex: Buy candy bar for $1, give up chance to buy gum with that $1 |
|
positive statements
|
Analysis of facts/data to make generalizations about economic behavior
Ex: Unemployment went down last quarter. |
|
production possibility frontier, PPM, PPC
|
A model of production showing opportunity costs of producing different amounts of two goods, demonstrates law of increasing opportunity costs
Ex: |
|
Resources
|
A natural, human, or manufactured item that helps produce goods and services
Ex: Labor |
|
Scarcity
|
Limited goods and services, forcing opportunity costs as we make economic decisions
Ex: Only a limited number of diamond rings in the world. |
|
Terms of trade
|
The rate at which units of one product can be exchanged for units of another product, price
Ex: I will sell 4 units of corn for your 20 units of squash. |
|
Unemployment
|
The failure to use all available economic resources (in this case labor) to produce desired goods or services
Ex: If employed, Bob could produce 100 ice cream cones a day. Failure to employ Bob means the economy is absorbing a loss of 100 ice cream cones. |
|
Factors of production (FOPs)
|
land, labor, capital, entrepreneurial ability
Ex: To produce corn syrup, I need all of the factors of production. -A businessman to start the corn syrup company. -Land and sunshine to grow corn. -Machinery to transform corn into corn syrup. -Labor to run the machinery. |
|
Technology
|
The body of knowledge and techniques that can be used to combine economic resources to produce goods and services
Ex: Assembly line increased Henry Ford's car production efficiency |
|
Utility
|
The satisfaction derived from consuming a good or service
Ex: I receive lots of utility when I eat cookie dough, and little utility when I eat spinach. |