Econ Flashcards: B - Opportunity Cost
(20 cards)
Opportunity cost
the cost of choosing; what you give up by choosing one option
Goods
objects that can fulfill human wants/needs, provide utility
Services
economic activity that is intangible; provides utility, but cannot be stored
Endowment
natural and human resources from which all goods and services must be produced
-finite, but not fixed (scarcity)
Utility
satisfaction; economists assume maximizing this drives individual choice; measured in utils
Profit motive
the tendency of people to engage in activities that will lead to monetary gain
Consumer sovereignty
the economic power of the individual in a free market
Government regulation
requirements the government places on private firms and individuals to achieve the government’s goals
Social & economic goals
- Freedom
- Security
- Equity
- Growth
- Efficiency
- Stability
Marginal utility
additional increment of utility associated with consuming one more unit of a good or service
Margin
in a succession of units, the specific unit you are focusing on
Total utility
the total satisfaction derived from consuming a specific quantity of a good or service; the total of marginal utilities for all individual units consumed
Satiate
satisfy
Initial decision
over-simplified decision-making process based on utility (consume until marginal utility =0)
Bliss point
maximization of utility
Marginal analysis
evaluating the impact of one additional unit
Util
a measure of utility (this is an abstract concept)
Diminishing marginal productivity
initially, one input increases the initial successive units of input toward the output, but eventually this will add to less output
Balancing at the margin
maximizing utility in light of scarcity
Discounting the future
utility diminishes the further in the future that utility is realized
