Economics Chapter 1 and 2 – Flashcards

there is scarcity, while humans have unlimited wants and needs

the study of how people work together to transform resources into goods and services to satisphy their most pressing wants, and how they distribute these goods and services among themselves.

Who produces what? How? Who consumes what? And who decides?

"The perpetual state of insufficency of resources to satisphy peoples unlimited wants"

land labour entrepreneurship good ideas

choose to produce some goods and services and not others.

cost of having something is the thing you give up to have it. Ex: you choose to study for a test instead of going skiing, so the opportunity cost of studying for that test is going skiing.

Market/Command/Mixed

people vote with dollars . capitalism. producers decide what they want to produce given the demand they see. consumers have "consumer sovereignty"

The ability of consumers to exercise complete control over what goods and services the economy produces (or doesn't produce) by choosing what gooods and services to buy (or not buy)

govnerment decides what is produced, who gets it and how much. communism, socialism. sometimes governement has the means of production as well.

a combination (question is what end of spectrum)

"The Latin phrase meaning 'everything else being equal'."allows economists to develop cause and effect relationships by removing other influential factors. abstraction that distills the essense out of complicated ecnomicc realities. limited by this exclusions of other inflencing factors, but still crucial to understanding economic issues.

people are both producers aand consumers; live in households where they consume goods and services they buy on the product market and they supply their resources (lands labor capital and entrepreneurship) on the resource market to firms that use the resources to procude the goods and services that appear on the product market.(how goods and services flow between housefolds and firms)

"A sub-area of economics that analyzes individuals as consumers and producers and specific firms and industries. It focuses especially on the market behavior of firms and households."

"A subarea of economics that analyzes the behavior of the economy as a whole"about how national economies fluctuate and interact.

"A subset of economics that analyzes the way the economy actualy operates". based on analysis; explains what is

"A subset of economics funded on value judgements and leading to assertions of what out to be." judgement; explains what ought to be. laden with personal and social values, more likley to be political.

An individual is driven by their own self interest naturaly, which serves as an "invisible hand" leading him or her to act in ways that promote society as a whole. people aren't making what people don't want, and people who want somethign will work hard ot get it. individual ambition that eventually benefits society as a whole.a driving force behind the producer side of consumer sovereignty.

concerns itself with the small parts of the economy, liek a buisiness, household, individual, individual product. Concerins itself with an individual's interaction with a firm, one product, one buisiness.How to beef farmers respond to increase prices in beef?

the larger things, the whoel system of production and distribution, national emnployment rate, rate of inflation, governement spending. how do whole societies make decisions? look at large things like the total amount of goods and services produced yearly. (GDP)

statement of fact, "what is," ex; GDP growth was 1.2% last year. can verify if true or untrue

statement of judgement, "what should be" ex in order to increase GDP, the best political choice would be OBAMA. opinion based analysis, personal judgement or ideals, cannot be proven or disproven

involve people deciding what to produce, which goods and services to offer. the benenfits are money, and satisfaction (psycic? income). for second, do work because make happy not money

resources use to make goods in production

broad category which includes all natural resources (minerals, water, real estate, orchard, oil, farm) what makes land valuable? Location (some places are more popular to live in others and thus cost more), resource value of the land, scarcity

physical and or intellectual effort to produce goods and services labor is scarce in certain areas (like brain surgeon), but not in othersin some places there are jobs, but not enough people trained for them

all the equipment, manufacturing plants, used ot turnout goods and services that we use. all goods that aid or are tools in producing other goods.

apply their skill to make decisions about productions of goods and services. benefit from work the entrepreneurs good factors of production exists, but don't organize themselves, adn that's the role of teh entrepreneur. he organizes them ina way to make a profit. entrepreneurs also create the ideas. drives production when owners fo teh factors of pordiction allocate land labor capital and entrepreneurship. Driver is profit.

illustration of the combinations of output, an economy can produce if all its resources are used, and used efficently.regardless fo the output choices economy makes, this represents an economy operating at its full potential. if you produce one good you can't produce as much of another.

as you continue to produce units of x, the cost of producing the next unit is greater than the one before. ex; producing timber;first take the trees that are closest, but later have to go to the trouble/expense of going deep in the woods or up a hill to get the product

The way an economy can use its resources to produce different goods when operating at full capacity.

technology, capital goods, increase in the labor force, new innovation, conquering new territories

if at a subsistance level cannot cut back on consumption in order to raise money to add captital to become richercan work harder ,but maybe maxed out work wise as well can work harder ,but maybe maxed out work wise as well

debt = acumulated yearly deficit (overspending).debt shift the curve to the left b/c more money is going to paying off obligation country and not used for production. Also disinsentivizes investment becuase of increased taxes and buying and producing as many consumption goods. economy slows down paying back what we've already spent so standard of living goes down.

production possibilities also change; if mroe resources, moves outwards and shift to the right. if only one axes then only that side of the surve shifts. if resources decrease, the curve will shrink and shift inwards b/c exodus of peopel, oppressive regime, war, natural disasters cau

any point on curve is a country using all of its resources at full potential, within the curve is less than teh ocuntries full potential (has underemployed resources) but can happen maybe in a recession. Outside curve is impossible.

"The quantity of other goods that must be given up to obtain a good" for example, the opportunity cost of producing capital goods is the consumption goods you could have made with the same resources. cannot know with certainty what the opportunity cost of an action will be. this principle is pertinent to all decision making, not just economic.

"The opportunity cost of producing a good increases as more of the good is produced. The law is based on the fact that not all resources are suited to the production of all goods and that the order of use of a resource in producing a good goes from the most productive resource unit to the last." the production possibilities curve that represents this situation curves downward to reflect the cost of production's exponential growth.the opportunity cost of production can become less serious after an economy's production possibilities curve has expanded far enough to the right (indicating a strong consumption base). continuing to produce goods even as their cost increases is worth it if those goods expand the economy's production possibilities.

"A country is poor because it does not produce capital goods. It does not produce capital goods because it is poor." if a country wishes to escape this cycle, they must tolerate a period of low production as they shift their resources to production. unfortunately, some economies cannot afford to produce anything but consumption goods and must remain poor. this phenomena is visible in both macroeconomics and microeconomics

"The less than full utilization of a resource's productive capabilities." a symptom of a lack of "economic efficiency," a condition in which an economy uses all factors of production at their full capacity if an economy is not producing at full capacity, they are at a point within the productions curve instead of on it. producing outside of the curve is only possible after a sudden increase of production capabilities, possibly due to a revolutionary innovation

"Any resource used in a production process. Resources are grouped into labor, land, capital, and entrepreneurship."

is the physical and mental effort of people who produce goods and services capital is a good used to produce or sell other consumption goods, sometimes from natural resources and real-estate (land) entrepreneurs take on the inherent risks of a business.

"The knowledge and skills acquired by labor, principally through education and training." functions like a capital good, except that the good in question is intangible. An example of human capital is a solid understanding of finance. This good can be used to produce financial advice, and it is inextricably attached to an individual which distinguishes it as "human" capital. a large amount of this in a economy can contribute to that economy's success

"The perpetual state of insufficiency of resources to satisfy peoples unlimited wants" Every time a need is satisfied and new need is created. Forces us choose to produce some goods and services and not others The is the key problem in economics in solving this via allocation.

"The study of how people work together to transform resources into goods and services to satisfy their most pressing wants, and how they distribute these goods and services among themselves."

"The ability of consumers to exercise complete control over what goods and services the economy produces (or doesn't produce) by choosing what goods and services to buy (or not buy)"

"The Latin phrase meaning 'everything else being equal'" Allows economists to develop cause and effect relationships by removing other influential factors. Crucial to distilling economic issues from complicated economic reality. Limits the predictive power of economics, by excluding some influencing factors.

"A sub-area of economics that analyzes individuals as consumers and producers and specific firms and industries. It focuses especially on the market behavior of firms and households."

"A subarea of economics that analyzes the behavior of the economy as a whole" Does not speak in terms of firms, households, or individuals. Deals in interactions between national economies. Neglects details in order to understand the greater trends in an economy,

"A subset of economics that analyzes the way the economy actually operates" Based on analysis; explains what is.

"A subset of economics funded on value judgements and leading to assertions of what out to be." Judgement; explains what ought to be.Heavily influenced by the personal and social values of the practicing economist. Used to advocate for policy changes.

"An individual is driven by their own self interest, which serves as an "invisible hand" leading him or her to promote society as a whole."Term created by Adam Smith. Driving force behind a free market capitalism. Reason why consumer sovereignty functions on the producer side of the equation.

Economics is how people work together to transform scarce resources into goods and services to satisfy the most pressing of our infinite wants and how we distribute these goods and services among ourselves. It is considered a social science because it how certain people participate in the economy and what social factors affect their actions. Some of the other sciences are sociology, anthropology, political science, and psychology. Social scientists individual and social behavior.

Ceteris paribus means "everything else being equal" in Latin, or "controlling for other factors." This concept is used to justify creating economic equations despite the huge amount of variables in economic reality. It is useful to economist because it allows them to extrapolate rules to help predict or explain economic trends. An example of this is the law of supply and demand.

The difference between resource markets and product markets is that the resource market deals in the transfer of labor, capital, land and entrepreneurship from households to firms while the product market deals in the transfer of goods and services from the firms to households. For example, a worker at a frozen yogurt stand's job is to sell yogurt to people on the product market while at the same time selling her own labor to firms on the resource market.