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19 Cards in this Set
- Front
- Back
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Positive economics |
The study of economics based on objective analysis |
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Normative economic |
Perspective on economics that reflects normative judgments or opinionated reactions toward economic projects, statements, and scenarios |
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Pareto Efficiency |
Economic state where resources are allocated in the most efficient manner, and it is obtained when a distribution strategy exists where one party's situation cannot be improved without making another party's situation worse. Pareto efficiency does not imply equality or fairness. |
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Welfare Economics |
Focuses on the optimal allocation of resources and goods and how the allocation of these resources affects social welfare. This relates directly to the study of income distribution and how it affects the common good |
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Opportunity cost |
Refers to a benefit that a person could have received, but gave up, to take another course of action. |
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Utilitarian economics |
A philosophy that bases the moral worth of an action upon the number of people it gives happiness or pleasure to. Used when making social, economic or political decisions for the "betterment of society". An action is considered to have utility only to the extent that it contributes to the overall good. |
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SSCO |
SUBSTITUTES SAME COMPLEMENTS OPPOSITE |
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3 factors of production |
Land, Labor, & Capital |
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Scarcity |
Basic economic problem, the gap between limited – that is, scarce – resources and theoretically limitless wants. This situation requires people to make decisions about how to allocate resources efficiently, in order to satisfy basic needs and as many additional wants at possible. |
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Economics |
Scientific study of human action, particularly as it relates to human choice and the utilization of scarce resources. |
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Production Possibility Frontier - PPF |
Curve depicting all maximum output possibilities for two goods, given a set of inputs consisting of resources and other factors. Assumes that all inputs are used efficiently. Production of one commodity can only increase when the production of the other commodity is reduced, due to the availability of resources. |
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3 basic questions of economics |
1) What to produce, 2) How to produce and 3) For Whom to produce. |
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Relative price |
A relative price is the price of a commodity such as a good or service in terms of another; i.e., the ratio of two prices. A relative price may be expressed in terms of a ratio between any two prices or the ratio between the price of one particular good and a weighted average of all other goods available in the market. |
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Property rights |
Theoretical socially-enforced constructs in economics for determining how a resource or economic good is used and owned. Resources can be owned by (and hence be the property of) individuals, associations or governments. ... the right to transfer the good to others. |
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Invisible Hand |
In a free market economy, self-interested individuals operate through a system of mutual interdependence to promote the general benefit of society at large. There are two critical ideas. First, voluntary trades in a free market produce unintentional and widespread benefits. Second, these benefits are greater than those of a regulated, planned economy. |
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Law of demand |
A microeconomic law that states, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease, and vice versa. |
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Substitute good |
2 goods that could be used for the same purpose. If the price of one good increases, then demand for the substitute is likely to rise. Therefore, substitutes have a positive cross elasticity of demand |
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Complementary good |
Good with a negative cross elasticity of demand, in contrast to a substitute good. This means a good's demand is increased when the price of another good is decreased |
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Inferior good |
A good that decreases in demand when consumer income rises (or rises in demand when consumer income decreases), unlike normal goods, for which the opposite is observed. |
