Basics Flashcards
(21 cards)
What is the main problem in economics?
How do we deal with unlimited wants with limited resources?
What is scarcity?
term to designate limited resources
What is an opportunity cost?
What you lose when you make a choice based on limited resources
What is rationality in economics?
Acting in your best interests. The decision made is common among other consumers
What is an extraneous variable?
An outside factor that you cannot do anything about (eg climate change)
What are the three questions of economics?
- What to produce
- How to produce?
- For whom to produce?
What are the three questions of economics based on?
They are based on what is available
What is absolute advantage?
One country makes a certain product
What is comparative advantage?
Many countries that make the same product, yet some countries make it really well. The products are comparable
What are the three types of economies?
Capitalist
Socialist
Marxist
What is capitalism?
- Little govt involvement
- Idea of survival of the fittest
- Lower taxes
- Less public services
- Private sectors
- heavy presence of poverty
- Not a lot or no regulations on companies
What is socialism?
- Some govt involvement
- Higher taxes
- More public services
- Subsidies
- Regulations on companies
What is marxism?
- Communism
- Countries are not as wealthy as others
- In theory, it would be a cashless society and everyone would be wealthy
- Govt dictates life of population
- Heavy military presence
What are the characteristics of the production possibilities theory?
- model based on the production of 2 products
- illustrates the opportunity cost
- operates under scarcity
- infinite ways to divide the limited resource
What is Keynesian policy?
- govt is very involved to find solutions in economy
- Founded by John Maynard Keynes
- More present in Canada
What is classical policy?
- laissez-faire: govt not very involved in finding solutions in economy
- Founded by Milton Friedman
- More present in the USA
What are the 3 types of products?
Normal
Inferior
Giffen
What is a normal good?
- 90% of products are part of this.
- When income goes up, you buy more, and vice versa (less money, less bought)
- Luxuries are part of this (vacations)
what is a inferior good?
- When income rises, you buy less, and vice versa (less money, more bought)
- Don’t mean as much the more money you have
- Reduced quality
- Dollarama
- Depends on personal perspective on how you view the item
- Fast food
What is a giffen good?
- Normal good
- Doesn’t work on income, but on price
- When the price goes up, you buy more
What is necessary to be on the PP curve?
- best technology available
- Full employment
- Maximum efficiency
