Unit 1 Flashcards
(56 cards)
Def: individual choice
decisions by individuals about what to do and not do
Def: economy
a system for coordinating a society’s productive and consumptive activities
Def: market economy
the decisions of individual producers and consumers determine the 3 economic questions (what, how, for who to produce) – little government interventions
**Private property rights!!*
Def: command economy
industry is publicly owned, central authority makes production decisions
Def: property rights
establish ownership & gives individuals the right to trade goods and services with each other
Def: marginal analysis
the study of the costs and benefits of doing a little bit more of an activity (vs a little bit less)
what is a resource
anything that can be used to produce something else (factors of production)
Def: opportunity cost
the value of the next best alternative that you must give up in order to get the item
Def: microeconomics
the study of how individuals, households, and firms make decisions and how they interact
Def: economic aggregates
economic measures that summarize data across man different markers (employment + inflation rates, GDP, etc)
Def: Positive economics
branch of economic analysis that describe the way the economy actually works
Def: Normative economics
makes statements about the way the economy should work
land
all resources that come from nature (minerals, water, cotton, etc)
labour
the effort of workers
entrepreneurship
risk taking, innovation, organization for the resources for production
capital
manufactured goods used to make other goods and services (machinery, buildings, tools, etc)
What does the production possibilities curve represent?
the trade-offs in an economy that produces only two goods - max quantity of one good that can be produced for each possible quantity of the other good
When is an economy considered efficient?
when there is no way to make anyone better off without making at least one person worse off
when will an economy achieve productive efficiency?
if it produces at a point on the PPC
what is allocative efficiency?
if an economy produces at the point along its PPC that makes consumers as well off as possible
what does a PPC look like with an increasing opportunity cost
bowed out
what does a PPC look like with an decreasing opportunity cost
bowed in
Def: comparative advantage
opportunity cost of producing the good is lower then another persons opportunity cost
Def: absolute advantage
a person can make more of a good in a given amount of time
