Chapter 2: Thinking like an Economist Flashcards
A visual model of the economy that shows how dollars flow through markets among households and firms is called
The circular-flow diagram
The the circular flow diagram, who are the two decision makers?
Households and firms
What do firms produces?
goods and services
What are inputs also called and who owns them?
factors of production and households
What is an example of an input?
labor, land, capital
Who are the buyers and who are the sellers in the markets for goods and services?
Firms are sellers and households are buyers
Who are the buyers and who are the sellers in the markets for factors of production?
Households are sellers and firms are buyers
Name the two types of markets
- Markets for goods and services
2. Markets for factors of production
Graph that shows combinations of output that an economy could possibly produce given available factors of production and production technology is called
The production possibilities frontier
Where would a point be in a PPF graph is the economy was maximizing efficiency with its resources?
Points that directly on the PPF (directly on the line)
If the point is located inside the PPF graph, what does that indicate?
An inefficient outcome
The study of how households and firms make decisions and how they interact in specific markets is called..
microeconomics
The study of economy-wide phenomena is called
macroeconomics
What two types of statements are there?
positive and normative statements
A statement that is descriptive and makes a claim on how the world is.
positive statement
