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15 Cards in this Set

  • Front
  • Back
Opportunity Cost
put a value on the next best choice or alternative.
Done in an abstract way (make things more simple).
Causation vs. Correlation
Causation- if "this happens," what will the result be?
Correlation- happen in a pattern
Assumptions(help to make things more simple)
Rationality- assuming with some consistency in behavior
1. People will act in their own self-interest
-people tend to learn from their mistakes
2. Marginal Decision Making-thinking @ the margin and picking the choice that will make me better off.
Marginal Decision Making Examples
Examples: Shopping and getting in the fastest line or just waiting. Gas prices and knowing when to get gas.
What a society needs.....
Questions and Answers
What to produce?.....Factors of Production
How to produce it (who will produce?) Efficiency in Production, investments, and etc.
For whom it is produced? Distribution-positive and normative
Government Involvement
1. Efficiency
2. Equity-involve normative judgment (discrimination/poverty).
3. Disaster-give out money to AID disaster areas
4. Economic Stability
A concept relating quantities of goods/services demanded to relative prices w/in a infinite period of time, ceteris paribus.
Law of Demand
There's inverse relationship btwn relative price(not accounting for inflation) & quantity demanded.
Determinants of Demand
Q=f(Income, complement & substitute goods, # of population, taste in perferences, EXPECTATION on price, weather
Normal- buy more, when income rises, less when income decreases
Inferior- opposite
If x & y are complements, increase demand for y will cause increase demand for x.
Buy one means you don't buy the other.
How much are you willing to pay for something you may or may not really want? Example: Coke or pepsi
Law of Supply
There is a direct relationship btwn relative price and quantity supplied, ceteris paribus.
- ^P>^Qs, decrease P > decrease Qs
Quantity Supplied(Qs)
Qs=f(Px, resources, technology, # of sellers, tax/subsides, EXPECTATIONS)