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38 Cards in this Set
- Front
- Back
a social science that studies the choices that individuals, businesses, governments and society make when they cope with scarcity and incentives
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economics
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a choice that uses the available resources to the most effective/ satisfying way to fill the wants of the person making the choice
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rational choice
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previously incurred costs that are irreversible
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sunk cost
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the highest valued alternative we give up to get something else (next valuable alternative)
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opportunity cost
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the gain as measured by what you are willing to give up
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benefits
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comparing all relevant alternatives (costs and benefits) systematically and incrementally
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on-the-margin
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what must be given up to get one more unit of something else (increasing function)
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marginal cost
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what you gain from one more unit of something else (decreasing function)
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marginal benefit
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a reward/ penalty that encourages/discourages a choice
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incentive
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study of choices that individuals and firms make and the way these choices interact in government
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microeconomics
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study of aggragate (total) effects of the choices individuals, firms, government make
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macroeconomics
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statement about what is (can check with facts)
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positive
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statement about what should be (opinion)
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normative
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varying one and hold all of the rest constant
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ceteris paribus (c.p.)
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just because variables are related has nothing to do with causality
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correlation vs. causality
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good and services that are bought by individuals/ households (3 categories)
1. durables 2. non durables 3. services |
consumption
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goods and services bought by businesses to increase their productive resources (investment)
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capital goods
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resources used to produce all goods and services
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factors of production
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getting something with out having to give up anything else (movement inside the ppf)
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free lunch
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cost of producing 1 more of something in terms of another product
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opportunity cost of production
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producing such that we cannot produce more of a good or service without giving up some of another good or service that is more highly valued
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allocative efficiency
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what a person is willing to give up to get one more of something else
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marginal benefit
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concentrating on th production of only one good
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specialization
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the ability to produce a good using fewer inputs that any other producer
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absolute advantage
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ability of person/ country to perform activity or produce a good at a lower opportunity cost that another
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comparative advantage
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US firm either produces product in another country or buys finished goods and services from firm located in different country
ex. GM moving production to Mexico |
off-shoring
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a firm buys finished goods, component, or service from another firm
ex. advertising companies, prisons, public relations |
out sourcing
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firm buys finished goods and services from other firms in another country
ex. call center in India |
off-shore outsourcing
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entire relationship between price of good and quantity demanded of good
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demand
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amount consumer plans to consume during a given time period at a particular price
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quantity demanded
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(all other variables held constant) If price of good rises, quantity demanded of good decreases
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law of demand
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a market with many buyers and sellers, none of whom have to ability to influence price
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competitive market
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sum of demand of all buyers in the market
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market demand
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a good that can be consumed in place of another
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substitute
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goods that are consumed together
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complement
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5 factors that cause demand to change
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1. price of related good
2. income 3. expectations 4. number of buyers 5. preferences |
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5 factors that cause supply to change
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1.prices of related goods
2. prices of inputs and other resources 3. expectations 4. number of sellers 5. productivity |
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when there is a shortage the price will rise, when there is a surplus the price will fall
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law of market forces
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