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Flashcards in Ch 1 -2 Deck (8)
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1
Q
  1. What does scarcity mean in economics?
A

Scarcity occurs when people want more of something than is readily available. In economics, scarcity forces people to make choices, as everyone cannot have everything. Without scarcity, an economy cannot exist

2
Q
  1. What is opportunity cost?
A

When the extra benefit is better than the extra cost

3
Q
  1. What is a rational consumer?
A

A rational person makes choices where the benefits are greater than the costs to them.

4
Q
  1. We make decisions where benefits are greater than the costs. And decisions are made incrementally: marginal benefits versus marginal costs.
A

Should I increase the level at which I am currently pursuit the activity

5
Q
  1. What is the difference between normative and positive economics?
A

How pp should behave (normative)

How pp will behave(positive ECN)

6
Q
  1. Be able to draw a PPC with a straight line or a curve line.
A

It shows us the maximum that a country can produce. There is clearly a limit to this at any one time just like there is a limit to the weight that you can lift over your head or eat at any time. We assume two goods (I will use apples and bananas as these easily can be represented by A and B) for ease of explanation – but it is true of any number of goods.

7
Q

Three Decision Pitfalls

A
  1. Measuring costs and benefits as proportions instead of absolute amounts - look at actual costs and benefits, not percentages
  2. Ignoring implicit costs
  3. Failure to think at the margin
8
Q

Sunk cost is part of the pitfall

A

Is some cant be recovered