Flashcards in Chapter 1 - Introduction Deck (24):
1
Economics
- The study of how society allocates scarce resources to satisfy peoples unlimited wants.
2
Resources
- Anything used to make something else.
3
The Four Main Categories of Resources
- Labour
- Land
- Capital (buildings, machines, technologies)
- Entrepreneurship (bring the first three together to produce something).
4
Scarce
- Quantities of resources avalible at any time are limited in supply.
5
Economic Rationality
- People use the information they have to make the best decisions for themselves.
- We assume that people act rationally when they make decisions.
6
Perfect Information
- Everyone knows everything they need to know with certainty.
7
Asymmetric Information
- Someone knows something somebody else doesnt know.
8
Marginal Thinking
- Thinking incrementally, in terms of doing more of something.
- Economic rational people make there decisions by thinking at the margin.
- You come to the best information based on the given information you have.
9
Opportunity Costs
- The cost of everything you give up to get something else.
- Calculated by adding the cost of the opportunity and the cost of the best forgone alternative together.
10
Explicit Cost
- Money transactions.
- Ex. Paying for a hockey ticket.
- Ex. Paying for a hockey ticket.
11
Implicit Costs
- The money you didnt make from working.
12
Efficiently
- Using our resources the best ways we can.
13
Market
- Buyers and sellers coming together to buy and selll goods and services.
14
Free Markets
- Decision making is decentralized.
- Capitalist countries.
15
Centrally Planned Economy
- Central authority (government) dictates how resources are allocated for production and consumption.
- Ex. USSR
16
Mixed Economy
- Mostly free market but have some government owned industries.
- Ex. Canada
17
Microeconomics
- Deals with decision making at the individual level.
- Study how households and individual firms make economic decisons about consumption and production.
18
Macroeconomics
- Looks at the economy-wide phenomena like unemplyment rates, inflation, interest rates etc...
19
Models
- Macro and micro use models to explain or predict economic outcomes.
- Models can explain how the economy works.
20
Positive Economics
- Tells us the way it is, the way the world actually works.
- Ex. If wages increase, employers will want to reduce the amount they hire.
- Ex. If wages increase, employers will want to reduce the amount they hire.
21
Normative Economics
- Points out what things should be like.
- How things ought to be.
- Ex. Low wage earners should be paid more to improve their standard of living.
- Ex. Low wage earners should be paid more to improve their standard of living.
22
Flow of Income
- How money moves through the economy.
23
Flow of Goods and Services
- How actual products are moving through the economy.
24
The Circular Flow Model of the Economy
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Black lines: How goods and services move through the economy.
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Red lines: How money moves through the economy.
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Blue lines: How financial institutions function in the economy.
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Green lines: How foreign markets function in the economy.
