Scarcity-Supply Flashcards
(31 cards)
Marginal Analysis
Making decisions based on the additional benefit vs the additional cost
Sunk Costs
An expense you can’t recover, should not effect decision making, ignore it.
Incentives
Actions or rewards that encourage people to act in a certain way
Preverse Incentives
Incentives with unintentional consequences
Positive statements
Facts
Marginalism
You can make incremental decisions along the way
Utility
The ability of something to satisfy needs or wants
Tradeoffs
All the alternative that we give up when we make a choice
Opportunity cost
Most desirable alternative given up when you make a choice.
Explicit expenses
Out of pocket expenses
Implicit expenses
Value of resources that could be used elsewhere
Physical capital
Any handmade resource used to create other goods
Aggregate output
The economy’s total production of goods and services for a person of time
5 Economic Assumptions
- Scarcity 2. Trade off 3. “self interest” 4. Compare marginal costs and benefits 5. Real-life situations can be explained through simplified models
PPC/PPF
A model that shows alternative ways that an economy can use its scares resources. Can use its scares resources. Demonstrates scarcity, trade-offs, opportunity costs, and efficiency.
3 Shifters of PPC
- Change in resource quality/quantity. 2. Change in tech, 3. Change in trade
Allocation efficiency
The products produced are the ones most desired by society
Capital Stock
Net accumulation of a physical stock of capital goods by a firm, industry, or economy
Terms of Trade
The agreed upon conditions that would benefit both countries
Quantity Demanded
The amount people are willing to buy at a particular price
Law of Demand
at a higher price consumers will demand a lower quantity of a good
Ceretris Parbius
“all other things held constant”
5 Shifters of Demand
- Tastes Preferences 2. # of consumers 3. price of related goods 4. Income (Normal goods vs inferior goods) 5. Future expectations
Normal goods
As income increases demand increases
