Module 1 - Fundamentals Flashcards
___ examines individuals and markets on a small-scale level on topics such as scarcity, choices, production, and competition; specialization, shaping markets, and adjustments due to weather and government.
Microeconomics
___ examine a whole economy on a large-scale level on topics such as total output, price level and production; trends and consequences of choices.
Macroeconomics
A ___ is any item that is used to produce goods and services.
Resource
___ are all natural resources; “gifts of nature”
Land
___ is all physical and mental activity devoted to producing goods and services.
Labor
___ are the tools, machinery, infrastructure, and knowledge used to produce goods and services.
Capital
Capital is not only money!
Aggregate = ___
Total
Macroeconomics
___ are tangible items which are created to increase productivity.
I.e., buildings, tools, machinery, etc.
Physical capital
___ is the knowledge and skills people acquire in order to increase productivity.
Human capital
___ is the talent or ability to combine land, labor, and capital to produce goods and services; it involves assuming risk and organizing resources into a productive process.
Entrepreneurial ability
___ is a condition that results from the inability of limited resources to supply unlimited wants.
Scarcity
___ is the comparison of the scarcity of one good, service or resource to that of another.
I.e., drinking water vs water in general
Relative scarcity
___ is the process of assigning a good, service or resource to one use instead of another.
Allocation
___ are the value or “cost” of the opportunity that was given up when another opportunity was chosen over another; these “costs” exist due to scarcity.
Opportunity costs
___ is the idea that people chose to do things that interest them; not necessarily selfish.
Self-interest
___ is the additional benefit associated with one or more unit of activity.
I.e., upgrading your Wendy’s meal for $1
Marginal benefit
___ is the additional cost associated with one or more unit of activity.
I.e., upgrading your Wendy’s meal for $1
Marginal cost
___ is the process of making choices in increments by evaluating the additional, or marginal, benefit against the additional, or marginal, cost of an action.
I.e., 1 more hour of sleep vs 1 more hour of studying
Marginal decision making
___ is the idea that people make choices in order to maximize overall benefit, or utility, of an action subject to its cost.
I.e., MB ≥ MC or MB < MC
Optimization
MB ≥ MC (DO IT)
MB < MC (DO NOT DO IT)
___ is when decisions are made based on (1) self-interest of the chooser, (2) marginal analysis, and overall pattern of choices which (3) optimize the overall well-being of the chooser.
Rational decision making
___ is the negative relationship between the MB associated with the use of a good or service and the quantity used.
I.e., study vs sleep
Decreasing MB
↑ activity ↓ MB ↑MC
___ is the positive relationship between the MB associated with the use of a good or service and the quantity used.
I.e., study vs sleep
Increasing MB
↓ activity ↑ MB ↓ MC
___ is the MB of the last unit produced and consumed; the intersection point of an Optimal Output Graph where MB and MC overlap; MB = MC.
Optimal Level of Output
Occurs when the marginal cost of the last unit produced is equal to the market price
___ is a table that shows the possible combinations of two different goods and services that can be produced with fixed resources and technology; max amount of good or service that can be produced based upon the alternative.
Production Possibilities Schedule
