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31 Cards in this Set

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