Chapter 2: How to Think Like an Economist Flashcards
why do the production possibilities frontiers often bow outward?
resources are usually specialized.
ie some resources are better at making one type of good over another type of good`
in the factors of production markets, ___ supply ___ with labour, capital, and land
households supply businesses
what’s a factor of production?
= used to make goods and services
eg. workers, machinery
capital=
anything human-made that’s used to produce a good or service
eg. computers, tools, trucks
in a circular-flow diagram, there are 2 decision-makers:
- households
- businesses
a production possibilities frontier with a steeper slope represents:
a relatively larger opportunity cost
a tornado impacts a country’s ability to produce it’s goods, but the effects are short lasting. How does this appear on a PPF?
as a dot on the inside of the original PPF curve
a hurricane hits Florida and they are unable to recover quickly to produce goods at the same rate as before. How would the new PPF compare to the pre-hurricane PPF?
since it’s long-lasting, the whole PPF line could shift to the left, representing a decrease in ability to produce goods
how do you calculate the slope of a line?
= rise/ run
what does the value of the slope indicate in a PPF?
the opportunity cost for the good on the y-axis
microeconomics focuses on:
actions of individual decision makers
- eg households and businesses
macroeconomics examines:
the economy as a whole
- including unemployment, inflation, economic growth
economists are ___ when they’re trying to explain the world, and ___ ___ when they’re trying to improve it
scientists
policy advisors
positive statements=
attempt to describe how the world actually works
- descriptive statements
- possible to prove/ disprove these statements
normative statements=
make suggestions about how the world should work
- recommendations/ prescriptive
- not testable
- people’s opinions
