Chapter 1 Flashcards
(34 cards)
Scarcity
Not enough resources for what we would like
Rationing
Decide who gets the resources
Three things that come from scarcity
Rationing
Competition
Choice
Problems unlimited wants/scarce resources
Land
Labour
Capital
Entrepreneurial skills
Land
Everything in nature
Labour
Physical and mental
Capital
Tool for production
Entrepreneurial skills
Bring together other resources
Economics
The study of scarcity and choice
3 capital
Capital good
Consumer good
Investment
Capital good
Satisfy indirectly
Consumer good
Satisfy directly
Investment
Produce capital good
8 guide post
- Opportunity cost
- Maximize utility
- incentives matter/property rights matter
- decisions are made on the margin
- information is costly
- secondary effects/what is seen and unseen
- subjectivity
- predictive science
Opportunity cost
Highest valued alternative
Maximize utility
Rational self-interest (maximize happiness)
Incentive matter/property rights matter
People make decisions based on benefits and costs
Diminishing marginal utility
Decreasing additional happiness
Information is costly
Info helps us make better choices but it is costly
Secondary effects
Unintended consequences
Subjectivity
Different people value different things differently
Predictive science
Economics is it a science
Capital good
Satisfy indirectly
Consumer good
Satisfy directly
