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Economics > Chapter 1 > Flashcards

Chapter 1 Flashcards

0
Q

Productive resources

A

Human natural and capital resources

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1
Q

Definition of economics

A

Study of how people use their scarce resources to satisfy their unlimited wants

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2
Q

Human resources

A

Physical and mental efforts that bring about the production of goods and services

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3
Q

Entrepreneur

A

person who tries to earn a profit by developing a new product or finding a better way to produce an existing one

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4
Q

Natural resources

A

“Gifts of nature”

Renewable and exhaustible

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5
Q

Capital resources

A

All of the human creations used to produce goods and services
Created by labor, then used for another purpose

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6
Q

Good

A

item you can see and touch that requires scarce resources to produce and satisfy human wants

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7
Q

Service

A

something not physical that requires scarce resources to produce and satisfy human wants

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8
Q

Economic theory

A

Simplification of economic reality used to make predictions about the real world

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9
Q

Things to remember

A

Simplify the problem
People always act in their own self-interest
Use positive not normative statements

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10
Q

Positive statement

A

Statement about reality that can be supported or rejected by referencing facts

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11
Q

Normative statements

A

Statement of opinion

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12
Q

Macroeconomics

A

National economics

Study of economic behavior of the market as a whole

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13
Q

Microeconomics

A

Market economics

Study if economic behavior in individual markets

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14
Q

Marginal analysis

A

When making a decision consider marginal benefit vs. marginal cost

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15
Q

Marginal

A

Extra, additional

16
Q

10 principles of economics

A

1.people face trade offs 2. Cost of something is what you give up to get it 3. Rational people think at the margin 4. People respond to incentives 5. Trade can make everyone better off 6. Markets are usually a good way to organize economic activity 7. Govt. can sometimes improve market outcomes 8. Country’s standard of living depends on it’s ability of production 9. Prices rise bc inflation

17
Q

Opportunity cost

A

Cost of any activity measured in terms if the value of the next best alternative forgone
•assume self interest
•ignore sunk cost

18
Q

Sunk cost

A

Something already paid and cannot be recovered

19
Q

Market

A

Means by which buyers and sellers carry out exchange

20
Q

Economic systems

A

Set of institutions and mechanisms that resolve economic questions for an economy

21
Q

5 questions for an economy

A
  • what goods and services will be produced?
  • how will the goods and services be produced?
  • who will get the goods/services?
  • how will the system accommodate change?
  • how will the system promote progress?
22
Q

Command system

A

Economic system in which all resources are govt. owned and production is coordinated by central plan of the govt.
•state answers questions
•little freedom
•damage to the environment

23
Q

Market system

A

System characterized by private ownership of means of production and use of markets/prices to direct market activity
•free competitive market
•market answers questions
•limited role of govt.-protect property right and maintain rules

24
Q

Mixed economy

A

Economic system that mixes central planning with competitive markets
Govt. regulated activity
Cronyism

25
Q

Cronyism

A

Uses govt. to stop competition by buying the govt. officials

26
Q

Efficiency

A

Guides resources into production of goods and services most wanted

27
Q

Incentives

A

Hard work, skill acquisition, innovation=higher standard of living

28
Q

Freedom

A

Coordination without coercion

29
Q

Transitional economy

A

Economic system in process of shifting from central to competitive markets
•privatization
Market&govt. answers questions
•strong temptation of govt. to intervene
•problem of selling off govt. owned firms

30
Q

Traditional economy

A

Economic system shaped largely by custom or religion or family
•play roles in organizing and coordinating economic activity
•typical where you see subsistence agriculture
•limiting to people/coercion

Economics (8 decks)

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