Economics Concepts and Choices: Chapter 1, Chapter 2, Chapter 3 – Flashcards
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Exists when there are not enough resources to satisfy human wants
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Scarcity
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Desires that can be satisfied by consuming a good or a service
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Wants
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Is the study of how individuals and societies satisfy their unlimited wants with limited resources
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Economics
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Objects such a clothing or food that can be bough
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Goods
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Is a person who buys or uses goods or services
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Services
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Is a maker of goods or a provider of services
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Producer
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What will be produced? How will it be produced? For whom will it be produced?
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What are 3 economic questions of scarcity you should ask yourself when running
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Are the resources needed to produce goods and services. All supplies are limited.
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Factors of production
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Includes all natural resources on or under ground to produce goods and services
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Land
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Is all the human time and effort that goes into making of products
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Labor
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Is all the resources made and used by people to produce and distribute goods and services. Tools, machinery, offices, stores, roads- all the producers physical resources.
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Capital
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Combination of vision skill ingenuity and willingness to take risks that is needed to create and run a new business. Most are innovators. They anticipate what the consumer wants.
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Entrepreneurship
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Are methods used to encourage people to take certain actions
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Incentives
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Is the benefit or satisfaction received from using a good or service
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Utility
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means to make decisions according to the best combination of cost and benefits
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Economize
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Every choice has a cost!
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No free lunch!
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is the alternative people give up when they make a choice
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Trade off
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is the value of something that is given up to get something else that is wanted. In other words, the next best choice
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Opportunity cost
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is an approach that weighs the benefits of an action against the costs
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Cost benefit analysis
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is the additional cost of using one more unit of a product
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Marginal cost
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is the additional satisfaction from using one more unit of a product
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Marginal benefit
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is a graph used by economists to show the impact of scarcity shows efficiency 1. Resources are fixed 2. All resources are fully employed 3. Only two things can be produced 4. Technology is fixed
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Production Possibilities Curve
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involves producing the maximum amount of goods and services possible
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Efficiency
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means producing fewer goods and services than possible
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Underutilization
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states that as production switches from on product to another, increasing amounts of resources are needed to increase the production of the second product
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Law of increasing opportunity costs
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are information in numerical form
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Statistics
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based on assumptions and are simplified because they focus on limited variables
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Economic models
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is the study of the behavior of individual players in an economy, such as individuals, families and businesses. It talks about consumer markets, business markets, and labor markets. Some topics of interest are profits, government regulation, competition, consumer behavior and business behavior.
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Microeconomics
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is the study of the economy as a whole such as inflation, unemployment, aggregate demand and aggregate supply. It talks about economic growth, economic stability, and international trade. Some topics of interest is finance, government spending, unemployment and inflation.
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Macroeconomics
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studies the economic behavior as it is. Involves facts and not judgements.
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Positive economics
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involves judgements of what economic behavior ought to be. involves recommendations.
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Normative economics
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The Theory of Moral Sentiments (1759) and Wealth of the Nations which talked about Mercantilism. He came up with the Invisible Hand.
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Adam Smith
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a system by which the government of the homeland controlled trade with its colonies- was economically sound.
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Mercantilism
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is the way a society uses resources to satisfy it's people's wants
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Economic system
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Families and Tribes make the economic decisions based on customs and beliefs like the Kavango people. Lower productivity but set jobs. Lower standard of living.
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Traditional Economy
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is an economic system in which the government makes all economic choices. like the soviet union or cuba.
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Command Economy
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is an economic system in which individual choice and voluntary exchange direct economics
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Market Economy
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is a system in which central government officials make all the economic decisions.
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Centrally Planned Economy
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is an economic system in which the government owns some or all of the factors of production
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Socialism
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is an economic system in which the government owns all the factors of production and there is little or no political freedom
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Communism
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systems require absolute obedience to those in power.
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Authoritarian
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assisted by Engels, wrote the Communist Manifesto. Made socialist theory.
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Karl Marx
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the concept that people have the right and privilege to control their possessions as they wish. They are the rights of individuals and groups to own businesses and resources.
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Private property rights
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is any place where people buy and sell goods and services
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Market
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is the principle that the government should not interfere in the marketplace.
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Laissez Faire
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is an economic system that is based on private ownership of the factors of production.
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Capitalism
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is a trade in which both traders believe that what they are getting is worth more than what what are giving up.
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Voluntary exchange
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A financial gain, esp. the difference between the amount earned and the amount spent in buying, operating, or producing something
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Profit
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involves all the actions sellers, acting independently, do to get buyers to purchase their products.
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Competition
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is the idea that consumers have the ultimate control over what is produced because they are free to buy what they want and to reject what they don't want.
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Consumer sovereignty
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is a situation in which people concentrate their efforts in the activities they do best.
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Specialization
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is a tool that economists use to understand how market economies operate. Households and businesses in correlation to goods and services and resources.
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Circular flow model
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is the market where goods and services are bought and sold.
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Product market
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is the market for the factors of production.
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Factor market
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is an economy that has elements of traditional, command and market systems.
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Mixed economy
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means to change from private ownership to government or public ownership.
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Nationalize
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means to change from government or public ownership to private ownership.
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Privatize
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refers to all the economic interactions that cross international boundaries.
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Global Economy
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is another name for capitalism, private ownership of productive resources.
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Free Enterprise System
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is the ability of everyone to take part in the marker by free choice.
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Open opportunity
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is a situation in which everyone has the same economic rights under the law.
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Legal equality
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is a situation which people decide which legal agreements to enter into.
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Free contract
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is the force that encourages people and organizations to improve their material well being from economic activities. Ex. Gary Dahl's Pet Rock
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Profit Motive
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Wrote Free to Choose, he headed economic policy in the head of the state.
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Milton Friedman
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A financial gain, esp. the difference between the amount earned and the amount spent in buying, operating, or producing something
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Profit
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A free enterprise system with some govt involvement. The government is a consumer in the resource market, spending money to but the factors of production.
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Modified Free Enterprise Economy
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Economic decisions are made by individuals or the open market.
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Market Economy
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Occurs when the market fails to allocate resources efficiently, or to provide the quantity and combination of goods and services mostly wanted by society. There is either an underallocation or an overallocation.
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Market Failure
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are products provided by federal state and local government and consumed by the public as a group
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Public goods
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An individual who does not to join a group representing his or her interests yet receives the benefit of the group's influence.
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Free rider
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Fundamental facilities and systems serving a country, city, or area, as transportation and communication systems, power plants, and schools
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Infrastructure
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An economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume
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Externality
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The existence of spillover costs upon third parties from the production of a good
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Negative externality
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beneficial side effect that affects an uninvolved third party
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Positive externality
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A government payment that supports a business or market
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Subsidy
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Benefits given by the government directly to individuals. Transfer payments may be either cash transfers, such as Social Security payments and retirement payments to former government employees, or in-kind transfers, such as food stamps and low-interest loans for college education.
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Transfer payments
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a transfer payment in which the government transfers income from taxpayers to recipients who do not provide anything in return
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Public transfer payment
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government programs that protect people experiencing unfavorable economic conditions
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Safety net
