CHAPTER 1 Flashcards
Quick Learn (23 cards)
What is the Economizing Problem for individuals?
It is the study of how individuals make social choices to optimize their level of satisfaction under conditions of scarcity.
This involves considering limited goods and services and limited time.
What is the Economizing Problem for society?
It refers to how society allocates resources to optimize overall satisfaction and well-being under conditions of scarcity.
What does the Production Possibilities Model illustrate?
It shows the trade-offs and opportunity costs of producing different combinations of goods and services.
What is the opportunity cost?
The value of the next best alternative that must be forgone in order to undertake a specific activity.
True or False: Rational behavior in economics assumes that individuals always make decisions without errors or emotional influences.
False
What does marginal analysis involve?
It involves examining the additional benefits and costs associated with a decision.
What are the two main branches of economics?
- Microeconomics
- Macroeconomics
Define positive economics.
It focuses on facts and cause-and-effect relationships, describing how the economy functions.
Define normative economics.
It incorporates value judgments about what the economy should be like and expresses support for particular policies.
What is the ‘other-things-equal’ assumption (ceteris paribus)?
It is the assumption that all other variables remain constant when analyzing the effect of one variable.
What is utility in economics?
It is the pleasure, happiness, or satisfaction obtained from consuming a good or service.
What are the two types of utility?
- Cardinal (measurable)
- Ordinal (comparative)
Fill in the blank: The _______ of an activity is the value of the next best alternative that must be forgone.
opportunity cost
What is the role of economic theory in economics?
It helps to explain and predict economic behavior and outcomes.
What is the Economic Perspective?
It involves understanding how economic choices are made and the implications of those choices.
What is meant by ‘rational self-interest’?
It is the assumption that individuals act to maximize their own satisfaction or utility.
How does scarcity relate to economics?
Scarcity necessitates choices and trade-offs in the allocation of limited resources.
What does the term ‘marginal’ refer to in economics?
‘Marginal’ refers to ‘extra’, ‘additional’, or ‘a change in’.
What is the significance of the Production Possibilities Model in relation to unemployment?
It illustrates the potential output of an economy and helps analyze the effects of unemployment on growth.
What are the key objectives of economics as outlined in the chapter?
- Definition of economics
- Features of the economic perspective
- Role of economic theory
- Distinction between micro- and macroeconomics
- Positive vs. normative statements
What does the concept of ‘utility maximization’ entail?
It entails making choices that provide the greatest possible satisfaction with given constraints.
True or False: The Economic Perspective emphasizes only monetary considerations.
False
What is the importance of the scientific method in economics?
It provides a systematic approach to understanding economic phenomena through observation and experimentation.
