Chapter 1 - Introduction Flashcards Preview

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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

  1. Labour
  2. Land
  3. Capital (buildings, machines, technologies)
  4. 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.

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.

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.

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

  • Black lines: How goods and services move through the economy.
  • Red lines: How money moves through the economy.
  • Blue lines: How financial institutions function in the economy.
  • Green lines: How foreign markets function in the economy.

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