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Economics
Final Exam REVIEW
| Question | Answer |
|---|---|
| economics | study of how people satisfy their needs and wants |
| microeconomics | study of behavior of individuals and firms to satisfy needs and wants |
| macroeconomics | study of national economy as a whole |
| positive economics | economic behavior how it actually is |
| normative economics | economic behavior how it should be |
| scarcity | limited amount of resources to meet unlimited amount of needs and wants |
| opportunity cost | value of the best alternative not chosen (missed opportunity) |
| factors of production | LLC + Entrepreneurship |
| land | natural resources. e.g. trees, water, oil, coal |
| labor | paid human effort used to make a product |
| capital | human-made resources. e.g. physical: tools, machinery, factories. human: knowledge, skills, education |
| entrepreneur | decision-maker who combines LLC to make products |
| law of increasing opportunity costs | when a firm switches from one item to another, it costs more and more to do so, it costs more and more to do so. |
| three economic questions | 1. what are we going to make? 2. how are we going to make it? 3. who's going to buy this crap? |
| economics system | way society chooses to allocate goods and services |
| traditional economy | economy that focuses on habit, custom, and ritual to allocate goods and services. farming communities, tribes |
| command economy | resources are in the hands of government , so government makes decisions about how to allocate goods and services |
| socialism | social policy adopted by people where government owns all factors of production |
| advantages of command economy | concentrate production to make a lot of things quickly |
| disadvantages of command economy | shortages, low quality, no incentives for innovation |
| communism | economic and political system where government owns all factors of production |
| Karl Marx | wrote Communist Manifesto, Das Kapital. father of communism |
| market econmoy | resources are in the hands of firms and individuals, so firms and individuals make decisions about how to allocate goods and services |
| Adam Smith | wrote Wealth of Nations. emphasized specialization, rational self-interest, and competition for economies with little to no government intervention (laissez-faire) |
| circular flow diagram | households and firms exchange factors of production and goods and services for money |
| mixed economy | has some government intervention |
| public goods | goods provided by government when market fails to provide them (public schools, parks, highways) |
| positive externality | side effect of a product that provides a benefit to people beyond the buyer: Vaccinations |
| negative externality | side effect of a product that provides a cost to people beyond the producer: pollution |
Created by:
danat214
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