TERMS 1- limits, alternative, choices – Flashcards
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Economics
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the study of allocation of scarce (limited) resources among alternative uses (ends) -OR- optimal decision-making under conditions of scarcity. Who decides what products are more important with scarce resources?
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Economic perspective
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economic way of thinking, including scarcity, choice, opportunity cost, purposeful behavior to increase utility, and marginal analysis.
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Scarcity
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restricts options and demands choices
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Opportunity costs
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to obtain more of one thing, society forgoes the opportunity of getting the next best thing.
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Utility
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the pleasure, happiness, or satisfaction obtained from a good or purchase.
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Marginal analysis
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comparison of marginal benefits and marginal costs, usually for decision-making.
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Resources
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(also called inputs, factors of production) anything you can use in production of goods and services.
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Property resources
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capital (k): interest Land: rent
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Human resources
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labor: wages / salary entrepreneurial ability: profit
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Limited resources
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limited quanitity and resources
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Unlimited wants
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constantly changing and never ending demand from people.
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Allocation
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to provide a product or service
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Marginal cost
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always means additional cost.
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Marginal benefit
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additional cost for a unit increase benefit. MB=MC*
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Scientific method
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1. observing real-world behavior/outcomes 2. formulating a cause/effect 3. test the hypothesis 4. accept, reject, and modifying the hypothesis 5. continue to test the hypothesis if necessary
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Economic principle
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a statement about economic behavior that enables prediction of the probable effects of certain actions.
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Other-things equal assumption
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(ceteris paribus) the assumption that factors other than these being considered do not change.
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Microeconomics
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concerned with decision-making by individual customers, workers, households, and business firms.
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Macroeconomics
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examines the performance and behavior of the economy as a whole.
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Aggregate
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collection of specific economic units treated as if they were one unit
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Positive economics
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focuses on facts and cause/effect relationships. Includes description, theory development, and theory testing. Deals with what the economy is actually like.
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Normative economics
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incorporates value judgements about what the economy should or ought to be like, or what particular policy actions should be recommended to achieve a desirable goal.
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Economizing problem
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the need to make choices because economic wants exceed economic means.
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Budget line
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a schedule or curve that shows various combinations of 2 products a consumer can purchase with a specific money income.
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Land
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Includes all natural resources used in the production process.
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Labor
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the physical actions and mental activities that people contribute to the production of goods and services.
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Capital
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includes all manufactured aids used in producing consumer goods and services.
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Entrepreneurial ability
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people who perform several critically important economic functions such as combing land, labor, and capital to produce a good or service, strategic business decisions, commercial new products, and bear risk.
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Fixed technology
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the state of technology (the methods used to produce output) is constant.
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Production possibilities curve
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displays different combos of goods and services that society can produce in a fully employed economy, assuming a fixed availability of supplies of resources and fixed technology.
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law of increasing opportunity cost
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as the production of a particular good increases, the opportunity cost of producing an additional unit rises.
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Economic growth
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a larger total output
