Ch. 15 Flashcards
(30 cards)
Four central ideas to econ
People can make rational choices by comparing costs and benefits
Cost
Benefits
Incentives
Opportunity of Choice
The best thing to give up to get the thing you want
High Utility
goods services that are highly desirable
Comparative advantage
A supplier who can produce a good or service at lower opportunity costs
Specialization
One person has one job
Elasticity
Change in one variable in economic equation relates to changes in another variable
Factors of production
resources used to make goods and services. Include land, labor, and capital
Marginal cost
The extra cost of adding one unit
Capital
human-made resources used to produce goods and services
Marginal Benefit
the extra benefit of adding one unit
Opportunity cost
the most desirable alternative given up as a result of a decision
Under-utilization
Use of fewer resources than an economy is capable of using
Scarcity
limited amounts of goods and services are available to meet unlimited demands
Efficiency
use of resources that maximize output
Different types of economy
Market, Traditional, Command, Mixed
Law of Supply
supply rises and falls with price if all other factors stay the same
Law of Demand
price and demand are inversely related if all other factors stay the same
Monopolies
when one supplier has a product no one can substitute, and new suppliers are blocked from entering production due to limited resources. Gov regulation can also lead to monopoly
Perfectly competitive market
many suppliers producing identical products. Suppliers can enter and exit the market freely
Monopolistic Competition
when independent suppliers produce similar but slightly different products. Each supplier has a monopoly on own product, but some products are similar enough that buyers can choose between them
Oligopolies
several suppliers compete for consumer attention but barriers prevent other suppliers from entering the market
Three types of ownership
- Sole proprietorship, the biggest risk, but keep all profits
- Partnership, income, and responsibilities are split
- Corporation, owned by many, day to day done by someone else, functions as a single individual. Profits divided among shareholders
Considerations of a Business Owner
Costs (explicit and implicit), Time Frame, Advances in Technology, Law of diminishing returns, marketing, advertising, and branding
Law of Diminishing Returns
as more of a variable resource is added to a fixed amount of another resource (ex: more computers without adding workers) increase in output will eventually decline
