Exam 1.1 Flashcards
(48 cards)
the study of how human beings coordinate their wants and desires given the decision-making mechanisms, social customs, and political realities of the society
economics
- what, and how much to produce 2. how to produce it 3. for whom to produce it
3 central problems facing any economy
-the goods available are too few to satisfy individual’s desires -People must make choices between different items because the resources necessary to fulfill their wants are limited.
scarcity
-the additional cost to you over and above the costs you have already incurred (the extra cost of one more unit)
marginal cost
costs that have already been incurred and cannot be reached
sunk costs
the additional benefit above what you’ve already derived (the extra benefit of one more unit)
marginal benefits
-if MB > MC, Q increases -if MB
economic decision rule
the benefit that you might have gained from choosing the next-best alternative
opportunity cost
the necessary reactions to scarcity
economic forces
economic force that is given relatively free rein by society to work through the market
market force
the price mechanism, the rise and fall of prices that guides our actions in a market (economic forces) (often political and social forces work together against the invisible hand)
invisible hand
achieving a goal as cheaply as possible
efficiency
actions taken by gov’t to influence economic actions
economic policies
table that lists the trade-offs between two choices
production possibility table
def.- a curve measuring the maximum combination of outputs that can be obtained from a given number of inputs -there is a limit to what you can achieve, given the existing institutions, resources, and technology -every choice you make has an opportunity cost. you can get more of something only by giving up something else
production possibility curve (PPC)
better suited to the production of one good than to the production of another good
comparative advantage
achieving as much output as possible from a given amount of inputs or resources
productive efficiency
getting less output from inputs that, if devoted to some other activity, would produce more output.
inefficiency
- technology improves 2. more resources are discovered 3. economic institutions get better at fulfilling our wants
how can we get more output with the same inputs?
- allows for specialization 2. creates competition, thus giving the consumer better quality products at a better price
benefits of trade
the increasing integration of economies, cultures, and institutions across the world 1. “+” -world economy is much larger, the rewards for winning are much greater (access to more customers/markets) -output is cheaper 2. “-“ much harder to win in a competing global market -lower prices means lower profits
globalization
the wages of workers in one country will not differ significantly from the wages of workers in another institutionally similar country
law of one price
countries specialize in those products for which they have a lower opportunity cost
law of comparative advantage
an economic system based on the market in which the ownership of the means of production resides with a small group of individuals called capitalists -private property -self-interest within the law -decisions market, signals (prices), profits
capitalism
