Final Exam Section 1 Flashcards
Economics
the study of how to use our limited resources to satisfy our unlimited wants as fully as possible
Factors of Production
Land, Labor, Capital, and Entrepreneurship
Production Possibilities Frontier
a graph that shows all the different combos of output of two goods that can be produced using available resources and technology
on line or inside of line is attainable (on line is the best) off of line/outside of the line is unattainable
a. Opportunity Cost
b. Trade Offs
a. the next best option
b. same thing but not the next best one just another thing you sacrifice to achieve the goal
Pure Command Socialism (DRAW THE PYRAMID)
economic system in which the means of production are publicly owned and fundamental economic choices are made by the central authority
triangle has central planning board then producing unit then consumers
Pure Capitalism Characteristics and the Circular Flow Model
Private Property and Freedom of Choice - privately owned means of production, businesses choose what to produce
Self-Interest- people are concerned about themselves
Competition- you know what that is
Limited Gov Intervention- provide an environment for econ to function
Invisible Hand Doctrine
as people pursue their own interests they will be led as if by an invisible hand toward the good of society
Factors that effect demand
income
taste and preference
expectations about prices
substitutes and complements
number of consumers in the market
(all of these make a new line)
What changes quantity supplied and demanded?
price, shift on line not new line
Factors that affect supply
technology
resource prices
number of producers in the market
Elasticity of Demand (Coefficients)
Perfectly Inelastic = 0
Relatively Inelastic < 1
Unit Elastic = 1
Relatively Elastic > 1
Perfectly Elastic = infinity
Elasticity of Demand (Equations) ED = ____
and two more
ED = % change in QD/
% change in p
QD = change in QD/initial QD
P = change in p/initial p
