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Flashcards in Exam 1 Deck (38):
1

What is the economic perspective?

the economic way of thinking

2

What is scarcity?

it's when economic resources needed to make goods and services are in limited supply

3

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.

4

What is utility?

the pleasure, happiness, or satisfaction obtained from consuming a good or service

5

What is purposeful behavior?

it's when people make decisions with some desired outcome in mind

6

What is self-interest behavior?

behavior designed to increase personal satisfaction, however it may be derived

7

What is marginal analysis?

comparisons of marginal benefits and marginal costs, usually done with decision making

8

What is the economic law/principle?

a statement about economic behavior or the economy that enables prediction of the probable effects of certain actions

9

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

10

What is macroeconomics?

examines the performance and behavior of the economy as a whole

11

What is positive economics?

focuses on facts, and cause and effect relationships

12

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

13

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.

14

Land

all natural resources used in the production of process

15

Labor

physical actions and mental activities that people contribute to the production of goods and services

16

Capitol

all manufactured aids used in producing consumer goods and services. investment is the money spent on things for production and accumulation of goods

17

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

18

What is a market?

an institution or mechanism that brings buyers (demanders) and sellers (producers) into contact

19

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

20

How will the goods and services be produced?

in combinations and ways that minimize the cost per unit of output

21

Who will get the goods and services?

any consumer on the basis of their ability and willingness to pay its existing market price

22

How will the system accommodate to change?

higher prices, consumer sovereignty

23

How will the system promote ?

creative destruction
technology advances
incentives

24

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

25

Businesses, the circular flow model

commercial establishments that attempt to earn profits for their owners by offering goods and services for sale

26

Product market, the circular flow model

the place where goods and services produced by businesses are bought and sold

27

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

28

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

29

Normal goods

a good or service whose consumption increases when income increases and falls when income decreases, price remaining constant

30

Inferior goods

a good or service whose consumption declines as income rises, prices held constant

31

Substitute good

a good that can be used in place of another good

32

Complementary good

a good that is used with another good

33

Independent 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

34

Law of supply

as price rises, the quantity supplied rises, as price falls, the quantity supplied falls

35

Determinants of supply

resource prices
technology
taxes and subsidies
prices of other goods
produce expectations
the number of sellers in a market

36

Determinants of demand

consumers taste
number of buyers in the market
consumers income
prices of related goods
consumers expectations

37

Price ceiling

sets the maximum legal price a seller may charge for a product or service

38

Price floor

a minimum price fixed by the government