week 1 (chapter 1, chapter 2) Flashcards

1
Q

society

A

decisions of firms and how they are made

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

economic agents

A

how decisions are made throughout society and how agents make these decisions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

households

A

decisions of individuals, and how they are made

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

economics

A

the study of how society manages its scarce resources

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

scarcity

A

the limited nature of societys resources

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

microeconomics

A

the study of how households and firms
1. make decisions
2. interact in markets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

macroeconomics

A

the study of the economy on a whole

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

economics

A

how people make decisions and the forces and trends that affect the economy as a whole

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

incentives

A

something that induces a person to act, i.e. the prospect of a reward or punishment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

what do rational people respond to?

A

incentives
- self interest is an important incentive

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

market

A

a group of buyers and sellers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

market economy

A

system that allocates resources through decentralized decisions of many households and firms as they interact in markets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what is the invisible hand?

A

prices guide self interested households and firms to make decisions, that maximize society’s economic well being

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

corollary

A

government intervention
- prevents the invisible hand’s ability to coordinate the decisions of the households and firms that make up the economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

efficiency

A

when society gets the most from its scarce resources
- we tend to squeeze the most out of our resources than is optimal for the future

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

equality

A

when prosperity is distributed uniformly among society’s members

17
Q

tradeoff

A

comparing the costs and benefits of alternative choices

18
Q

opportunity cost

A

whatever must be given up to obtain any item

19
Q

rational people

A

systematically and purposefully do the best they can to achieve their objectives
- take action if the marginal benefit outweighs the marginal cost

20
Q

marginal benefit

A

what is the gain that you would make if you spent an additional dollar
- how much more of a benefit would you obtain?

21
Q

marginal cost

A

what is the cost that i would gain if you spent an additional dollar
- how much more of a cost would you obtain?

22
Q

productivity

A

the amount of goods and services produced per unit of labor
- depends on the equipment, skills, and technology available to workers

23
Q

market failure

A

when the market fails to allocate society’s resources efficiently

24
Q

causes of market failure

A

externalities
market power

25
Q

externalities

A

when the production or consumption of a good affects bystanders (e.g.) pollution

26
Q

market power

A

a single buyer or seller has substantial influence on market price (e.g. monopoly)

27
Q

fiscal policy

A

the use of government revenue collection (taxation) and expenditure (spending) to influence the economy
- done to smooth out downturn

28
Q

monetary policy

A

the process by which the government controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability

29
Q

inflation

A

increase in the general level of prices

30
Q

production possibility frontier

A

shows how the combinations of two goods the economy can possibly produce, given available resources and available technology

31
Q

comparative advantage

A

the ability to produce a good at a lower opportunity cost than another producer
- using the gradient of the PPF (slope) tells you how much of one thing you are giving up to produce another

32
Q

what can shift a PPF

A

improvements in technology, increase in number of laborers, new forced migration, relaxed immigration laws, etc.

33
Q

why can the PPF be bow shaped

A

not every worker produces both goods at the same rate

34
Q

positive statements

A

describes a relationship, could use data to confirm or refute
ex. the government should print less money

35
Q

normative statements

A

value judgement that cannot be confirmed or refuted
ex. an increase in the price of burritos will cause an increase in consumer demand for music downloads