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ECO155 handout 1
macroeconomics
| Question | Answer |
|---|---|
| what is economics? | a science that examines the behavior of people who are motivated by self interest, in situations where resources are scarce. |
| four resources | land, labor, capital, entrepreneurship |
| what is opportunity cost? | something that is given up with a choise is made. the higher the opportunity cost, the less likely it will be done. |
| what is land? | natural resources. ex: minerals, forests,unimproved land, water. |
| what is labor? | physical and mental talents that people contribute to production |
| what is capital? | goods that can be used to further production. ex: machinery, technology, tools, etc. |
| what is entrepreneurship? | a talent that someone has to organize land, labor, and capital to produce more goods and business. |
| what is scarcity? | when the want of a good is greater than resources to satisfy the want. |
| what does scarcity cause? | opportunity cost; when there is scarcity it causes people to choose one good over the other. |
| what is TANSTAAFL? | there ain't no such thing as a free lunch |
| how is scarcity illustrated on a PPF curve? | by moving from one point to another. |
| what is a rationing device? | deciding who gets what goods are available. this is basically who is willing to pay the highest price for something in a market economy |
| What are logical fallacies? | Fallacy of Composition, Post Hoc Fallacy |
| what does ceteris paribus mean? | all other things remaining unchanged |
| who is the father of modern economics? what book did he write, and what were the key concepts? | Adam Smith. The Wealth of Nations (1776). the key concepts were specialization, the invisible hand |
| what does trade result in? what kind of game is it? | it results in a "consumer surplus" and is a positive-sum game. |
| what are transaction costs? | costs by consumers over and above the price that the sellers received to cover production costs. basically its the costs of shipping costs, taxes,paper work, insurance, etc. |
| what shape is the Production Possibilities Frontier? | concave to the origin. |
| what is economic growth? | increase in a nations ability to produce goods/services. |
| what is the Rule of 72? | rule of thumb to compute the time required to double production quantities. |
| how does economic growth occur? | by getting more resources, increasing resource productivity, and improving technology. |
| what are marginal costs/benefits? | additional costs/benefits. it is connected to consuming/using another unit of a good. |
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