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31 Cards in this Set
- Front
- Back
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Define Economics
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the study of human efforts to satisfy what seems like unlimited and completing wants
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Define Scarcity
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Not enough to go around. #1 study in economics. is the reason we study economics.
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how does does scarcity impact the use of resources?
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it helps us make better choices for us to use our limited resources.
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what are the three basic economic question?
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1. what to produce
2. who to produce 3. for whom to produce |
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what are trade-offs
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all the alternative option we give up whenever we choose one thing over the other.
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opportunity cost
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the loss of the MOST desirable alternative choice available.
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what is a production possibilities curve? what does it tell us?
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a model that shows all production options when resources are used in various ways. *it shows what is sacrificed (opportunity cost) and what is gained.
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what does the term "guns and butter" refer to?
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decision made by the nation to produce military or consumer production.
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what is the economic system?
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the method used by a society to study produce and distribute goods and services.
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what is the motivating force in a free enterprise system? name the pillars of capitalism.
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Businesses are allowed to compete for profit.
-profit motive -private property -free contract -voluntary exchange -competition |
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Tradition Economy
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relies on habit, ritual, costom
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Command Economy
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the central gov't makes all production
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Market Economy
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Individuals and privately owned business make decisions about production.
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Mixed Economy
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combines ideologies from both market and command economy.
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who was adam smith? what was his theory?
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scottish economist and philosopher. "the Father of modern economy"
"classical capitalism" or "the classical model" |
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invisible hand
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competition and the laws of supply and demand will regulate the market.
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laisse affair
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(french term) hands off, let the people do as they will.
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why is there some gov't intervention in most market economies?
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some needs of the people cannot be practically met by private businesses, when this happens the gov't must supply these goods/services. these are public goods and included.
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Demand
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Goods/Service that consumers are willing and able to by at a given price.
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law of demand
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when price is high demand is low, when price is low demand is high.
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what is Ceteris Paribus?
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"all other things are held constant"
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change in quantity of demand
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movement up/down the same curve not a shift because the same population that would buy a product anyway, buy a larger/smaller quantity of it.
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change in demand
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specifically to price (price related) a change other than price (non-price related)
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elastic of demand
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a measure of how the consumer will respond to a change in price of how much the consumer will respond to a change in price.
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what does it mean for a product to be elastic?
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change in price that will cause a larger change in demand. very sensitive to price.
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what does it mean for a product to be in inelastic?
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change in price will cause a small change in demand. not sensitive.
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what is normal good?
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good we demand more of when our income increases.
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what is inferior good?
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goods we demand less of as our income increases.
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law of diminishing marginal utility
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the usefulness and satisfaction that we get from receiving additional units of a product starts to diminish as we receive more and more of it.
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Supply
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amount of good/services that producers are willing to provide at a given price.
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law of supply
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when price is high supply is high when price is low supply is low
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