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Econ Unit1

Econ Chapter 1

QuestionAnswer
Utility Pleasure, happiness, or satistaction
Marginal analysis comparing marginal benefits to marginal losses, using marginal to mean 'Extra"
Scarcity limited resources,yet humans have unlimited wants
other things equal assumption (latin) ceteris paribus
abstractions simplification, omit irrelevancies
Economic Goals GEEP FIBS - economicGrowth, full Employment, economic Efficiency, Price-leve Stability, economic Freedom, equitable distribultion of Income, Balance of trade, economic Secuity
Difference between micro and macro Micro- aggregates or small units. Macro- total
Positive economics How things ARE
Normative economics How things ought to be
fallacy of composition the fallacy that something true for a part is true for a whole
Is correlation and causation related no
Factors of production CELL - Capital, Entrepreneur, Labor, Land
full employment All avaliable resources used
full production all resources used BEST
Production efficiency Mixing your production of goods and services in the least costly way, i.e. on the curve of a PPC curve
allocative efficiency Where on the curve society wants
Assumptions for a PPC *Resources/factors of production are fixed *technology is fixed * economic efficiency is possible * only produce 2 products
What does PPC stand for? Production possibilities curve
law of increasing opportunity costs more of a product that is produced, the greater its opportunity cost
opportunity cost the next best thing
optimal efficiency Marginal Benefit = marginal cost
market system capitalism, demand and efficiency determine prices
command system government determines prices
Circular flow diagram draw and check with one in book
resource market where resources and services of resource are bought and sold
product market where goods and services produced by businesses are bought and sold
Freedom of enterprise people can use resources to make money however they want
freedom of choice owners can dispose of property how they want to
self interest motivating force of all economic units
what does competition require? independently acting seller and buyers operating in a particular product or resource market AND freedom of buyers/sellers to elave market
Division of labor/specialization advantages makes use of differences in ability, fosters learning by doing, saves time
Four Fundamental Questions 1. What goods and services will be produced 2. how will the g/s be produced 3. who will get the g/s 4. how will the system accommodate change?
economic costs payments that must be made to secure and retain the needed amounts of those resources
normal profit payment for an entrepreneurs contributions
economic profit I think this is what you make when you subtract all costs from your profit
consumer sovereignty consumers in control, i.e. market economy
dollar votes whats making money determines what is made
creative destruction getting rid of a market for one product to make room for a newer one
3 merits of market system efficiency, incentives, freedom (FIE)
Created by: Jessica Avva Jessica Avva on 2010-08-31



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