Flashcards in Exam 1 Deck (38):
What is the economic perspective?
the economic way of thinking
What is scarcity?
it's when economic resources needed to make goods and services are in limited supply
What is opportunity cost?
when in order to obtain one of something, society forgoes the opportunity of getting the next best thing that could have been created with those resources. Think of the no free lunch.
What is utility?
the pleasure, happiness, or satisfaction obtained from consuming a good or service
What is purposeful behavior?
it's when people make decisions with some desired outcome in mind
What is self-interest behavior?
behavior designed to increase personal satisfaction, however it may be derived
What is marginal analysis?
comparisons of marginal benefits and marginal costs, usually done with decision making
What is the economic law/principle?
a statement about economic behavior or the economy that enables prediction of the probable effects of certain actions
What is microeconomics?
the part of economics concerned with decision making by individual customers, workers, households, and business firms. think of it as the sand, rocks, and shells at the beach
What is macroeconomics?
examines the performance and behavior of the economy as a whole
What is positive economics?
focuses on facts, and cause and effect relationships
What is normative economics?
incorporates value judgments about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal
What are the economic resources?
all natural, human, and manufactured resources that go into the production of goods and services. labor, land, capitol, and entrepreneurial ability.
all natural resources used in the production of process
physical actions and mental activities that people contribute to the production of goods and services
all manufactured aids used in producing consumer goods and services. investment is the money spent on things for production and accumulation of goods
What is the law of increasing opportunity cost?
as the production of a particular good increases, the opportunity cos of producing an additional unit increases
What is a market?
an institution or mechanism that brings buyers (demanders) and sellers (producers) into contact
What goods and services will be produced?
the goods and services that can be produced at a continuing profit will be produced, while those whose production generates a continuing loss will be disconinued
How will the goods and services be produced?
in combinations and ways that minimize the cost per unit of output
Who will get the goods and services?
any consumer on the basis of their ability and willingness to pay its existing market price
How will the system accommodate to change?
higher prices, consumer sovereignty
How will the system promote ?
Households, the circular flow model
one or more persons occupying a housing unit, they buy goods and services that businesses make available in the product market. they obtain needed income by selling resources in the resource market
Businesses, the circular flow model
commercial establishments that attempt to earn profits for their owners by offering goods and services for sale
Product market, the circular flow model
the place where goods and services produced by businesses are bought and sold
Resource market, the circular flow model
where households sell resources to businesses. productive resources flow from households to businesses, while money flows from businesses to households in the form of wages, rent, interest, and profits
Law of demand
the principle that, other things equal, an increase in a product price will reduce the quantity of it demanded, and vice versa
a good or service whose consumption increases when income increases and falls when income decreases, price remaining constant
a good or service whose consumption declines as income rises, prices held constant
a good that can be used in place of another good
a good that is used with another good
goods that not related to one another and a change in price of one has little or no effect on the demand for the other
Law of supply
as price rises, the quantity supplied rises, as price falls, the quantity supplied falls
Determinants of supply
taxes and subsidies
prices of other goods
the number of sellers in a market
Determinants of demand
number of buyers in the market
prices of related goods
sets the maximum legal price a seller may charge for a product or service