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139 Cards in this Set
- Front
- Back
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Economics is a _______ science that studies behavior of _______.
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social, decision making
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system for coordinating society's productive activities
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economic system/economy
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Economics is derived from Greek word economy "one who manages a _______."
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household
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the science which studies how humans try to attain their material wants given scarce resources that have alternative uses
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economics
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Scarcity Principle: Boundless _______ cannot be satisfied with limited _______.
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wants, resources
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Scarcity Principle: having more of one thing usually means having _______ of another.
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less
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Scarcity Principle: _______ wants with _______ resources means you have to _______ something up.
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unlimited, limited, give
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Scarcity means _______ MUST be made.
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choices
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The goal of economics is to allocate societies _______ to make the combination of products most desired by _______, produce each item in the most _______ manner (least waste of resources), and sell at the _______ price.
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resources, consumers, efficient, lowest
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millions of people making ordinary decisions
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economy
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Resources are _______.
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scarce
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Economic resources such as human talents, natural resources, and stock of capital goods are _______
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finite
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a type of resource that includes natural resources
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land
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a type of resource that involves available time of workers
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labor
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a type of resource that involves man-made productive assets
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"real" capital
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a type of resource that involves education, skill of workers
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human capital
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a type of resource where there are innovators and risk takers
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entrepreneurship
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a type of resource that involves knowledge, processes, techniques
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technology
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Money IS/ IS NOT a resource.
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is not
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If it wasn't for _______, there would be no economics.
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scarcity
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"There is no such thing as a free lunch" emphasizes which concept?
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opportunity cost
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value of the next best alternative that must be forgone to undertake an activity
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opportunity cost
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a cost that is beyond recovery at the moment a decision must be made
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sunk cost
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The higher the value of the alternative lost, the _______ the opportunity cost of doing some activity.
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higher
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How much decisions are called _______ decisions.
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marginal
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Thinking on the margin when making a decision compares the marginal _______ for doing something vs. the marginal _______ of taking the action.
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benefit, cost
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additional satisfaction gained from having one more unit of something
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marginal benefit
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additional cost from one more unit of something
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marginal cost
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If marginal benefit is greater than marginal cost, would we produce or not produce one more unit?
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produce one more unit
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If marginal benefit is less than marginal cost, would we produce one more unit or not?
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We would not produce one more unit.
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If marginal benefit equals marginal cost, we are producing at the _______ amount and would _______ at this level.
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right, stay
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If you want someone to do something, make it worth it. Give them an _______, increase the marginal benefit or marginal cost.
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incentive
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Foundation of trade is _______ gain.
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mutual
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Trade makes it possible to consume a bundle of goods far beyond what one could produce on _______.
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their own
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division of tasks, allows individuals to do what they do best
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specialization
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The economy as a whole, can produce more when each person _______ in a task and _______ with others.
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specializes, trades
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If someone is willing to supply you with a product at a _______ cost than you could produce it yourself, it makes sense to trade for it.
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lower
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natural state for markets, state of rest
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equilibrium
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achieve the maximum fulfillment of wants using available resources
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economic efficiency
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lowest possible cost way of production, did not waste resources
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productive efficient
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produce goods in the quantities individuals wish and they are willing to pay
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allocative efficiency
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Markets are efficient, when no one can be made better off without someone else being made _______ off.
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worse
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People are _______ when they could reorganize resources such that someone would gain more, without anyone losing something. In this scenario, they are not producing at the lowest possible _______ cost.
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inefficient, opportunity
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the distribution of economic prosperity fairly among its members, how the pie is divided, more of a value judgment ("what is fair")
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equity
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The fundamental concept in economics is _______.
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scarcity
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Economics is a way of _______, a method to approach and _______ problems.
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thinking, solve
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The word economy came from the _______, meaning "manage your own household."
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Greek
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a social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices
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economics
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Which type of economics is the study of choices that individuals and businesses make, the way these choices interact with markets, and the influence of governments?
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Microeconomics
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Microeconomics involves _______ and _______ decisions, individual _______ decisions, and market _______ activity.
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pricing, quantity, buying, economic
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Which type of economics studies the performance of the national economy and the global economy?
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Macroeconomics
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Macroeconomics measures _______ economic activity.
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TOTAL
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What are the three basic economic questions?
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What to produce?
How to produce? For whom to produce? |
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What concept says that you go about your daily life trying to get the most you can from your limited resources and in doing so you are providing the most for society as a whole?
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Adam Smith's invisible hand
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available resources are used to produce goods and services at the lowest possible cost or least cost (_______ efficiency) and in the quantities that give the greatest possible value or benefit (_______ efficiency)
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productive, allocative
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The economy is _______ efficient when it can produce no more of one good without giving up some of the other good.
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productive
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Efficiency is often described as the _______ of the pie.
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size
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fairness
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equity
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Equity is a _______ judgment on what is fair.
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value
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Equity is often described as the size of the _______ of the pie.
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slices
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All decisions require _______.
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trade-offs
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When you logically compare cost versus benefits, you have made a _______ choice.
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rational
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what you gain
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benefits
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Benefits are measured by the most a person is willing to _______ to get something.
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give up
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what you must give up
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cost
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Cost is not measured in _______ terms but in terms of _______ cost.
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monetary, opportunity
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Economic decisions are normally made at the _______, to do more of or less of an activity.
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margin
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increase value gained from doing more of the activity
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marginal benefit
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opportunity cost of an increase in the activity
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marginal cost
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Incentives can be _______ or _______.
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positive or negative
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Incentives change the marginal _______ or marginal _______.
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benefit, cost
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Economists question any policy that doesn't have an _______.
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incentive
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Economics is a _______ science that studies the _______.
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social, choices
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Economists find meaning in how decisions _______ scarce resources.
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allocate
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Positive economic statements deal with what _______, are _______ as to right or wrong.
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is, testable
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Normative economic statements concern what _______ to be, are _______ judgements. Either more _______ or _______, and they are not _______. Example: Policy goals
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ought, value, agree, disagree, testable
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variable that is manipulated
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independent variable
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variable that stays the same
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dependent variable
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nothing else changes, all things held constant
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ceteris paribus
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Mistakes to watch out for with cause and effect:
- Fallacy of _______: what is true for individual, or part must necessarily be true for the group or whole. - Fallacy that _______ is _______: two variables are associated in time, one must necessarily cause the other. _______ is not causation. |
composition, association, causation, correlation
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a simplified representation of the real world designed with the intent to better understand that world
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model
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The production possibility frontier involves trade offs and opportunity cost. The PPF is used to show the effects of _______, choices/_______, _______ costs, and thinking on the _______.
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scarcity, trade offs, opportunity, margin
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The assumptions of the production possibility model include: economy that can produce only _______ goods, resources can be used to produce _______ good, _______ amount of resources and technology, and the goods are produced _______.
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two, either, finite, efficiently
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The purpose of the PPF is to have maximum combinations of _______ goods that can be produced.
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two
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Any combination of goods on the PPF that can be produced using currently available resources is an _______ point.
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attainable
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Any combination of goods on the PPF that cannot be produced using currently available resources is an _______ point.
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unattainable
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All points on the PPF are _______. To gain an additional unit of one good, you must give up an additional unit of of the other good (cost).
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efficient
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Being inside the PPF is _______. You could have more of one good without costing you any of the other.
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inefficient
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Is it possible to be outside the curve with our current resources?
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No
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Economic _______: the ability of the economy to produce more of both goods and services.
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Growth
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Factors which allow for economic growth:
- Increase _______-size (immigration, women in work force) - Increase _______ of labor - increase in skills, health - Increase _______ of resources i.e. oil, zinc - Increase quantity _______- the more capital goods produced this period, the greater the potential future growth. - Increase _______ - computer, bio/medicine, genetic engineering, internet |
labor, quality, availability, capital, technology
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The shift in the PPF curve doesn't have to be _______, depending on what is causing the growth, the production of one or the other good may benefit more, so the shift would be greater for the item gaining the benefit.
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parallel
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Things that decrease PPF levels:
- Decrease _______- natural disaster decreases natural resources; desert, forest or coast line taking over farmland - decrease _______ of resource - wars, national disaster which decrease capital of an economy |
resource, quality
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Opportunity cost = _______/_______
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loss, gain
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The bowed out shape of the PPF- as you gain additional units of one good, you give up _______ amounts of the other.
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larger
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The more of a product that is produced, the greater is its opportunity cost... definition of which concept?
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Law of increasing opportunity cost
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Through _______, an economy may actually provide more that it could using only it's economic resources, specialization, division of labor.
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trade
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the opportunity cost of producing the good is lower for that individual than other people
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comparative advantage
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If the individual can produce more than anyone else, they have a _______.
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absolute advantage
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When considering trade, we DO NOT look at the absolute advantage, but at the _______ advantage.
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comparative
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Profit = _______ price - _______ cost.
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selling, opportunity
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Savings= _______ cost - _______ price.
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opportunity, selling
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The circular flow model is designed to show two markets: _______ & _______ market.
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product, factor
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Factors of production, resources used to produce goods and services, but which are not used up in the production process are part of the _______market. (circular flow model)
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factor
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The _______ market is where households buy goods and services sold by the firm (circular flow model).
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product
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How the circular flow model works: _______ buy factors of production in the factor market. Factors of production earn an _______, the resources are a cost of doing business. Payment to factors of production: factor market of labor; capital, firm pays dividends to households who invested in company so the capital should be purchased. Firms use the resources to produce _______ and _______. Goods/services are then sold to households in the _______ market. Households will use the _______ received to purchase the goods/services. Receipts from sell of good is _______ to firms. Firms will use the revenue to purchase more factors of _______.
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Firms, income, goods, services, product, income, revenue, production
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Growth shifts the PPC curve to the _______.
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right
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manmade tool that goes back into producing other goods and services
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capital stock
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goods that go back into producing other goods and services
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capital goods
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Economics that produce more consumer goods than capital goods have very little to add to potential _______. When they produce more capital goods than consumer goods, people are unhappy in the short-term but in the future, they _______ a lot more.
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production, produce
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The terms of trade will be between the _______ costs for both countries.
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opportunity
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a mechanism that brings buyers & sellers together
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market
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a market in which there are many buyers & sellers such that no single buyer or seller can control the market price
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perfect competition (monopolistic)
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_______ is the regulator of the market system.
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Price
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the dollars paid for the item: _______ price
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money
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the ratio of one price to another: _______ price
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relative
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a buyer side of the market
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demand
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a schedule or curve that shows the different quantities of the good or service that individuals are willing & able to purchase at each price and a range of prices during a specific period of time, other things held constant
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demand curve
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To be include in demand, you must _______ the good, have the _______ to purchase the good, and plan to _______.
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want, income, buy
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A point on the demand curve is a price/quantity relationship called _______.
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quantity demanded
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A change in price cannot change _______.
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demand
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Law of Demand:
- _______ relationship between price & quantity demanded - As price goes up, quantity demanded goes _______. - As price goes down, quantity demanded goes _______. |
inverse, down, up
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If two goods serve basically the same function, if the price of one rises, the relative price or opportunity cost increases which results in consumers switching form the higher-priced item to the lower-priced item.
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Substitute Affect
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If prices rise and your income remains the same, then you would be unable to purchase the same quantity at the current price that you could have before the price change.
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Income Affect
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If a factor other than price affects your willingness to buy the good, then there is a change in _______.
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demand
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An increase in demand shifts the curve to the _______, while a decrease shifts the curve to the _______. Price is held _______.
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right, left, constant
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In the case of a _______ good (used in place of), one tends to purchase the good with the lowest price. Ex: coke and pepsi
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substitute
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In the case of a _______ good (consumed together), the price of one item increases the cost of using the other item.
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complement
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Shortages drive prices _______. Surpluses drive prices _______.
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up, down
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producers side of market
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supply
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a schedule or curve that shows the various quantity of a good/service that firms will offer for sale at various prices in a range of price at a specific period in time, other things held constant
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supply
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the amount of the product a firm is willing to sell at a specific price
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quantity supplied
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Suppliers will take resources where they get the most _______.
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profit
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Law of Supply:
As price increases, the quantity supplied _______. As price decreases, the quantity supplied _______. |
increases, decreases
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At each price, a smaller quantity will be provided
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decrease in supply
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At each price, a larger quantity will be provided
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increase in supply
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Equilibrium: Balance
- Quantity _______ = Quantity _______. - Marginal _______ = Marginal _______. - No _______ or _______. - No _______ pressure. - No wasted _______. - _______ Efficient. |
supplied, demanded, cost, benefit, shortages, surpluses, price, resources, allocatively
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A surplus results when _______ exceeds _______. The current price is _______ equilibrium price. Suppliers are going to push price down to eliminate excess _______.
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Qs, Qd, above, quantity supplied
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A shortage results when _______ exceeds _______. The current price is _______ equilibrium price. Buyers push price up fighting for limited quantity _______.
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Qd, Qs, below, supplied
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