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10 Cards in this Set
- Front
- Back
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P 1: Peo/society faces trade offs -Equality v efficency |
1.Peo trade between different goals weighed as one goal v another (ex- guns/butter) 2. Peo in society causes one value traded for another 3. Equality vs Efficency- Gov policies conflict -Efficency-getting max use of society's scarce resources -Equality-equal $ distribution --Inverse relationship (peo don't work hard) Knowing peo make trade offs doesn't predict their chioces --neither trade off option should be ignored |
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P 2: Cost of something is what you give up to get it |
Opprotunity Cost- whatever must be given up to get something else -Need to factor all gains/loses in |
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p 3: Reasonable people think within the margin -Reasonable people -marginal value |
Rational People-Only willing to buy pro if marginal value>marginal cost --econ assumes most peo are like this --Base on marginal cost, not average cost --peo will pay more for rare useless than common useful |
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P 4: People respond to incentives -Incentive |
Incentive: something given that causes a person to act -MC -vital to understanding market -Policymakers can change incentives through law --May have unitnended consequences |
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P 5: Trade can make everyone better off |
Everyone is comp for resources Isolation not best answer; would have to do everything for self Trade increases productivity -often allows specialization |
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P 6: Markets are a good way to organize econ activity -Market Economy |
Gov economies decide everything -have no invisible hand; fail Market Econ -a)Allocates resources through decentralized -- -comp&families using invisible hand -b)Most countries have this -c)gov prevents invisible hand it hurts econ (tax - -policy change price; forced price amount) |
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P 7: Gov can sometimes Produce good mark outcome -Property Rights -Market Failure -Externality -Market Power |
Must enforce what makes econ work --Property rights=peo's right over scarce resources --Must enforce IH; can't let peo ignore it (peo -- --must pay for pro IH doesn't always work FAILURE IN EFFICENCY --Market failure-mark fails to independently make best pie growth ---Ex) Externality-Outside person effects another person without consent (ex-polution kills) ---Ex) Market dominance-Few peo/orginizations have massive control over econ (monopoly) FAILURE IN EQUALITY -Some peo don't have basic needs -gov makes pie more equal
Public policy can help, but not always -policy maker does what's best for self -good person makes bad choice |
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P 8: A country's standard of Living depends on its ability to trade goods/services |
1. Productivity-the amount of goods produced per hour --The ultimate explination for standard of living; all other answers wrong --What causes some countries to be FAR wealthier than others --Drastically effects public policy; need to make policy that boosts productivity |
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P 9: Prices Rise too much when the government prints too much money -Inflation |
Inflation=overall increase in price of economy -More money printed=greater inflation -Less money printed=less inflation -Great harm to society; policy makers want to keep it down |
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P 10: Society faces short term trade off between inflation and unemployment -Business Cycle |
Greater inflation=more money=more stimulus=more hiring=lower unemployment -Occurs whether it's low or high -Policymakers use tax, spending, and printing to manipulate Very powerful; how to use is debatable Business Cycle=constant flux in econ activity -Tradeoff big part of it |
