Economics 1
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| The social science concerned with how individuals, institutions and society make best choices under scarcity | Economics
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| exceeds society's productive capacity | Economic wants
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| A viewpoint that envisions individu-als and institutions making rational decisions by comparing the marginal benefits and marginal costs associated with their actions | Economic perspective
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| listed under economic perspective | Scarcity and choices, purposeful behavior, marginal analysis
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| resources are scarce(economic perspective) | Scarcity
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| what are the steps to the scientific method | observe real life behavior, formulate a hypothesis, test hypothesis, accept, reject or modify the hypothesis, continue to test hypothesis,
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| the part of economics concerned with decision making by individual units such as household, a firm, or an industry and individual markets, specific goods and services, and product and resource prices | microeconomics
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| the part of economics concerned with the performance and behavior of the economy as a whole. Focuses on economic growth, the business cycle, interest rates, inflation, and the behavior of major economic aggregates such as household business and sectors | macroeconomics
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| economics that focuses on facts and cause and effect relationships | positive economics
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| economics that includes description, theory development and theory testing | positive economics
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| economics that avoid value judgement It tries to establish scientific statements about eco-nomic behavior and deals with what the economy is actually like. Such scientific-based analysis is critical to good policy analysis. | positive economics
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| which incorporates value judgments about what the economy should be like or what particular policy actions should be recommended to achieve a desir-able goal. looks at the desirability of certain aspects of the economy. | normative economics
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| It underlies expressions of support for particular economic policies. | normative economics
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| Positive economics concerns what is, whereas norma-tive economics embodies subjective feelings about what ought to be . Examples: Positive statement: “The unemploy-ment rate in France is higher than that in the United States.” Normative statement: | positive and normative economics
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| “France ought to undertake policies to make its labor market more flexible to reduce unemployment rates.” Whenever words such as “ought” or “should” appear in a sentence, you are very likely encoun-tering a normative statement. | positive and normative economics
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| the need to make choices because economic wants exceed economic means—will enhance your understanding of economic models and the difference between micro-economic and macroeconomic analysis. | economizing problem
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| listed under the economizing problem | limited income, unlimited wants, budget line, attainable and unattainable combinations, trade offs and opportunity cost
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| his money! And the majority of us have much more lim-ited means. Our income comes to us in the form of wages, interest, rent, and profit, although we may also receive money from government programs or family members (economizing problem) | limited income
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| A line that shows the different combinations of two products a consumer can produce with a specific money income, given the products' prices | budget line
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| listed under society's economic problem | land, labor, capital and entrepreneurial ability
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| includes all natural resources (“gifts of nature”) used in the production process. These include forests, mineral and oil deposits, water resources, wind power, sunlight, and arable land. | land
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| consists of the physical ac-tions and mental activities that people contribute to the production of goods and services. | labor
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| includes all goods and services. Included are all factory, storage, trans-portation, and distribution facilities, as well as tools and machinery. | capital
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| the human resource that combines the other economic resources of land, labor, and capital to produce new products or make innovations in the production of existing products | entrepreneurial ability
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| takes the initiative in combining the resources of land, labor, and capital to produce a good or a service. | entrepreneur
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| makes the strategic business decisions that set the course of an enterprise. | entrepreneur
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| innovates, He or she commercializes new products, new production techniques, or even new forms of business organization. | entrepreneur
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| takes risks | entrepreneur
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| individuals who provide entrepreneurial ability to firms by setting strategy, advancing innovations, and bearing the financial risk if their firms do poorly. | entrepreneurs
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| lists the different combina-tions of two products that can be produced with a specific set of resources, assuming full employment. | productive possibility model
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| As more of a particular good is produced, its marginal opportunity costs increase | law of increasing opportunity cost
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| The limits placed on the amounts and types of goods and services available for consumption as the result of there being only limited economic resources from which to produce output; | scarcity
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| the fundamental economic constraint that creates opportunity costs and that necessitates the use of marginal analysis ( cost-benefit analysis ) to make optimal choices. | scarcity
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| restricts options and demands choices. Because we “can’t have it all,” we must decide what we will have and what we must forgo. | scarcity
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| that “there is no free lunch.” You may be treated to lunch, making it “free” from your perspective, but someone bears a cost. Because all resources are either privately or collectively owned by members of society, ultimately society bears the cost., | scarcity
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| The amount of other products that must be forgone or sacrificed to produce a unit of a product. | opportunity cost under scarcity
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| the pleasure, happiness, or satisfac-tion obtained from consuming a good or service | utility (purposeful behavior)
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| rational self-interest | purposeful behavior
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| individuals and utility | purposeful behavior
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| firms and profit, business decides what products to produce and how to produce them, government deals with finance | purposeful behavior
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| desire outcome | purposeful behavior
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| comparisons of marginal benefits and marginal costs, usually for decision making | marginal analysis
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| benefit is the perceived lifetime pleasure (utility) from the larger-size stone. If the marginal benefit of the larger diamond exceeds its marginal cost (and you can afford it), buy the larger stone. | marginal benefit
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| But if the marginal cost is more than the marginal benefit, you should buy the smaller diamond instead—even if you can afford the larger stone! | marginal benefit
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| marginal means what | extra
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| Economic principles are generalizations relating to economic behavior orto the economy itself. Economic principles are expressed as the tendencies of typical or average consumers, workers, or business firms. | generalizations
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| listed under economic principle | generalization, other things equal assumption, graphical expression
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| the assumption that factors other than those being considered do not change. They assume that all vari-ables except those under immediate con-sideration are held constant for a parti-cular analysis. | other-things-equal-assumption
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| the determining variable is called | independent variable=x
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| the variable is determined is called | dependent variable=y
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| infinity slope is |
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| economic resources are the natural human and manufactured to produce goods and services |
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| Because economic resources are used to produce goods and services, they are called | factors of production or inputs
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| Money is not considered a capital resource because money is | not productive
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| Why is entrepreneurial ability distinct from labor even though both are considered as a category of economic resource? | Because entreprenuerial ability is not directly engaged in production.
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| The marginal benefit curve is | downward
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| the marginal cost curve is | upward
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| With these curves, the optimal allocation of resources to a particular product will occur when | MB=MC
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| current output is such that marginal cost exceeds marginal benefit, should more or fewer resources be allocated to this product? | fewer
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| In a command economy scarce goods are allocated by |
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Created by:
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