Quiz 1 Part 1 Flashcards
Define Economics
The Science of making decisions in the presence of scarce resources. Balancing LIMITED resources with UNLIMITED wants.
What are Goods?
TANGIBLE items such as food, cars, or clothing
What are Services?
INTANGIBLE items such as education, health care, or leisure
Define Goods and Services
Satisfy human needs, wants, or desires and are a source of happiness, well-being, satisfaction, or utility
Define Scarcity
Resources are limited or insufficient to meet human wants and needs.
Define Constraints
Things that limit. Example: Time, Capital, Laws, Money, Resource availability
Define Opportunity Cost
The value of the next best option or the value of the best alternative choice sacrificed
Define Rational Behavior
Individuals are assumed to act rationally – a given person’s goals and knowledge will cause them to try and achieve a certain set of goals. Example: A greedy person is acting rationally if they spend all of their money on themselves.
Define Marginal Analysis
Comparison of Marginal Benefits and Marginal Costs. Marginal = additional, extra, or change in
Define Positive Economics
attempts to assess the economy and economic policies without resorting to value judgements. Based on Scientific facts. Ex: an increase in money supply leads to an increase in price
Define Normative Economics
Attempts to assess the economy and economic policies and involves the use of value judgments - Cannot be tested scientifically
Define Ceteris Parabus
“all else held constant” only look at 1 variable at a time and all others are held constant. Often expressed in models or graphs
Define Economic Principle
A statement about economic behavior or the economy that enables prediction of probable effects of certain actions
What are Models?
An abstract replica of reality - a simplified representation of how something works. Can be larger or smaller
What are the five Factors of Production?
Land, Labor, Capital, Entrepreneurship, and Technology
