WEEK 1 FLASHCARDS
(33 cards)
What is Economics?
Economics is the study of how society manages its scarce resources.
(Mankiw, 2013)
What is Scarcity?
Scarcity means society has limited resources and cannot produce all the goods and services people want.
What are Resources in Economics?
Stock of money, time, materials, staff, and other assets used by individuals or society to function effectively.
What is Microeconomics?
The study of how households and firms make decisions and interact in specific markets.
What is Macroeconomics?
The study of the economy as a whole, including issues like unemployment, inflation, and economic growth.
What is a Positive Statement?
A factual statement describing how the world is; can be tested or proven true/false.
What is a Normative Statement?
A value-based statement suggesting how the world ought to be; based on opinions and values.
Why do economists often disagree in policy discussions?
Because of differing normative views influenced by ethics, religion, and political philosophy.
What does the Production Possibility Frontier (PPF) show?
It shows various combinations of output an economy can produce using all available resources efficiently.
What do points on the PPF curve represent?
Efficient production levels—using all resources without waste.
What does a point inside the PPF represent?
Inefficiency or underutilization of resources.
What does a shift outward in the PPF mean?
Economic growth due to increased resources or improved technology.
What is Opportunity Cost in the context of PPF?
The amount of one good given up to produce more of another good.
What are Unintended Consequences in economics?
Unexpected outcomes resulting from economic decisions or policies.
Give an example of an unintended consequence.
Full insurance may reduce the incentive to lock a bike, increasing theft risks.
Who makes up a society in the economic sense?
A group of different households and firms (companies) that interact in the economy.
Why can’t society satisfy all wants?
Because resources are limited and wants are unlimited—this creates scarcity.
What is the fundamental economic problem?
Scarcity and the need to make choices about how to allocate limited resources.
What is the role of choice in economics?
Because of scarcity, society must choose how to allocate resources efficiently.
Can positive statements be tested?
Yes, they can be tested and validated with evidence.
Are normative statements based on evidence?
Partially. They include value judgments and cannot be tested purely by facts.
What role do economists play when making normative statements?
They act as policy advisors, not scientists.
Why do economists often disagree?
Because of differences in values, ethical beliefs, and interpretations of data in normative analysis.
What are the two main assumptions when constructing a PPF model?
1) The economy produces only two goods; 2) all resources are fully utilized.
