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Flashcards in Chapter 1 - Econ issues and concepts Deck (41)
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1

Economics def

Study of use of scarce resources to satisfy unlimited wants

2

Scare resources/scarcity def

Limited resources

3

Factors of production what they are + name them (3)

A society's resources : Land, labour,capital

4

2 types of outpus

Goods (tangibles) or services (intangibles)

5

What is implied by scarcity

need for choice

6

Name of cost associated with each choice and how it is defined

opportunity cost : opp. cost of one commodity is amount of other commodities you could have instead

7

Margin/marginal cost/marginal benefit

margin : refers to the choices to come. marginal cost/benefit = cost and benefit related to the next decision

8

PPB graph meaning and things it illustrates and how

Production possibility boundary. scarcity choice and opportunity cost. scarcity = region above ppb slope. choice = region below ppb slope. opp. cost = ppb slope

9

calculation of opportunity cost

direct cost of activity (represents $ I could have instead) + what you gave up in order to do it (represents things I could have instead) - savings the activity generates

10

4 key economic problems

1. What is produced and how ? 2. What is consumed and by whom ? 3. Why resources are sometimes idle ?
4. Is productive capacity growing ?

11

Resource allocation def

Quantities of various goods that are produced (how resources are allocated = how they are used = qt of stuff they allow to do)

12

Microeconomics def

Study of allocation of resources as it is affected by the workings of the price system (how many done depending on price system)

13

What instance can influence all 4 economic problems and why

Government policy by its design and effectiveness

14

Market economy def.

Complex. Not coordinated. self organizing. self interested. Incentives. Specialized productive activities

15

efficiency def

organizing available resources to produce goods and services that 1) people value most 2) when they want them the most 3) By using the fewest possible ressources

16

2 things Institutions created by the state do

Protect private property and enforce contractual obligations

17

3 groups of decision makers

Consumers, Producers, Government

18

Who makes marginal decisions and what does that mean

Consumers and producers : decide if they will be made better off by buying or selling less of any given product

19

Circular flow of income and expenditure

Individuals (consumers) and firms producers. On goods market, ind. pay firms for goods and services in exchange of goods and services. In factor market (3 factors of production), indiv. sell their factor markets to firms in exchange of payment for factor services.

20

2 characteristics of production and who noted them

specialization and division of labour. Adam Smith

21

What is specialization

Allocation of different jobs to different people

22

What is self-sufficiency

One person does the job

23

Why specialization is better than self-sufficiency (2 reasons)

1) Comparative advantage (individual abilities differ)
2) Learning by doing (focusing on one activity leads to improvements

24

What is divison of labour

Extension of the idea of specialization for the production of a single good or service (travail à la chaîne)

25

Specialization must be accompagnied by what

Trade

26

What is barter

troc

27

How money eliminates cumbersome system of barter

seperates transactions involved in the exchange of products, so facilitates specialization and trade

28

what facilitated globalization

rapid reduction of transportation and communication costs in last half of 20th century

29

What economic attitude is to abandon if you want to take part in global economy as a country

isolationist economic stance (stance = attitude)

30

Three pure types of economic systems.

Traditional (marchés), Command, Free-market