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Flashcards in K: Ch 1 Vocab Deck (17):
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Economics

The study of how individuals and groups of individuals respond to and deal with scarcity

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Scarcity

Something is scarce when we want more than is available

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Leisure

Time spent in any activity other than work

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Work

An activity that an individual engages in that increases the amount of goods and services the individual can consume

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Saving

Forgoing consumption. Essentially, saving allows individuals to transfer income from today to the future.

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Capital

Anything that is produced and then used to produce other things.

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Investment

The production of new capital. Aggregate investment is the use of aggregate real output to produce capital. Investment is that part of aggregate real output purchased by firms in the form of capital goods.

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Opportunity cost

The opportunity cost of a choice is the value to an individual of the best alternative that the individual could have chosen but did not. Put slightly differently, the opportunity cost of a choice is the value of the best-for-gone opportunity.

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Production Possibilities Frontier (PPF)

The boundary between the output mixes that can be produced and those that, given scarce resources and available technologies, cannot.

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Inputs

A resource that is used to produce goods or services.

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Physical Capital

Capital in the form of tools

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Human Capital

Capital in the form of individuals with developed skills

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Technology

The particular method by which tools and work effort are combined to produce goods and services. Technology is often embodied in the tools themselves. For example, a computer chip is a capital good; it is also a tool that embodies a technology that increases production when applied to particular activites

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Logical Model

An abstraction that shows the most important elements of a complex situation in which many things interact and change, by focusing attention on a simplified version, in which only a few important things interact and change.

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Invisible Hand

A concept first invoded by Adam Smith in "The Wealth of Nations" to describe the unintended beneficial consequences that follow from the pursuit of self-interest in certain circumstances.

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Relative Production Cost

Amount of one commodity that must be given up to produce one additional unit of a second commodity

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Relative Price

The amount of some good that must be given up to get one additional unit of some other good