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