Exam 1 Flashcards
What are the three resources of economics?
Land, labor/human capital, and capital
What are the two main reasons why economists disagree?
Value judgments and differences an economic models
What are the two components of the invisible hand theory?
People will pursue their own self interest and in doing so they are led by invisible hand to do what is best for society
Command economy
Government makes all decisions
Market economy
Individual consumers and firms make decisions
What does PPF stand for?
Production possibilities frontier
What is the principle of increasing costs?
As we move downward to the right on the PPF the opportunity cost of an extra “net” increases
What are consumption goods?
Go to the provider immediate satisfaction for example Fish
What are capital goods?
Goods that help increase production of the consumption good example fishing net
What are two things that cause inefficiency?
Unemployment and insufficient use of inputs
What are two things that cause economic growth?
Improvement in technology and an increase in resources
Positive economics
Study of what is
Normative economics
Study of what should be
Competitive market
Many sellers and buyers of the goods and no individuals actions can influence the price
Law of demand
As price goes up demand goes down
