Term
|
Definition
1 :is the study of choice
2:how to make people choose to allocate scarce resources among virtually unlimited wants. |
|
|
Term
|
Definition
| a good or resource that if at a price of zero, people still want more than is readily available ( but rare in economics itself) |
|
|
Term
|
Definition
1. People are Rational( you will not knowingly make a choice that will make you worse off)
2. Optimal choices are made at the margin: we consider small changes from our current condition
3. People respond to incentives : if costs or benefits of an action change- your decision might change. |
|
|
Term
|
Definition
| Addition to total benefits from a small change in behavior. |
|
|
Term
|
Definition
| Addition to total costs from a small change in behavior |
|
|
Term
|
Definition
| are irrelavent, the term that economics use to describe past costs that have already happened. |
|
|
Term
| Weigh or estimate total costs and benefit |
|
Definition
| If the marginal benefits of the action are better than the marginal costs then you take that action |
|
|
Term
| two reasons why we respond to changes (marginal) |
|
Definition
1. marginal decision making - makes it easy to change our choices
2. there are always substitutes- something always better, but not all substitutes are good, better, or perfect. |
|
|
Term
| Three Key economic questions that every society must answer. |
|
Definition
A. What do we produce?
B. How do we produce it?
C. For whom do we produce it? |
|
|
Term
| 2 types of techniques that are used to answer these three questions |
|
Definition
1. centrally planned economy : all questions are answered by some central government authority
2. Market Economy : individual consumers and producers make all of these decisions. |
|
|
Term
| Centrally Planned Economy |
|
Definition
-how was answered by using our resources
- for whom could be used by rationing.
- centrally planned economies don't always work
-Decision will be based in part by needs - maternalistic system. |
|
|
Term
|
Definition
-Chaotic System because everyone is making decisions
-people are weighing options
-the key is the price system |
|
|
Term
|
Definition
Changes in prices send signals to consumers and producers and leads to changes in behaviors
- if the price goes up - the production of a product goes up
- if a production goes up the consumption can go down? |
|
|
Term
|
Definition
- works more smoothly than government authority.
- all decisions are made by individuals
-gov puts restrictions on things
-we have goods and svcs that are completely produces solely by the gov |
|
|
Term
|
Definition
getting the most possible output from available resources
-getting a given qty of output w/ the fewest possible resources |
|
|
Term
|
Definition
| producing a given output at the lowest possible cost ( not wasting resources) |
|
|
Term
|
Definition
| Producing goods and services that consumers want |
|
|
Term
|
Definition
-If there is no competition then there is no guarantee to minimize costs and have efficiency
-Broken into subcompanies
-With this the government puts regulations on prices and what not |
|
|
Term
|
Definition
| occur if a third party not directly involved in a trade is affected by the trade in some way |
|
|
Term
|
Definition
| third party enjoys the benefits |
|
|
Term
|
Definition
| Third Party suffers a cost |
|
|
Term
| just like monopolies- if we have externalities- the government can step in |
|
Definition
| they lower the cost to get you to buy it- and they subsidized it |
|
|
Term
|
Definition
-Fairness
- the good news is that markets are usually fair |
|
|
Term
|
Definition
| in order to get one thing you have to give something up |
|
|
Term
|
Definition
the value of the next best alternative that is given up when a choice is made
-your original decision is the opportunity cost even though you don't have the option now of that decision |
|
|
Term
|
Definition
-Attempts to describe the world as it is
-includes economic theories of how the world works, not universally accepted theories but if its wrong it doesn't mean that it's not accepted.
-this can be tested |
|
|
Term
|
Definition
-what ought to be
-descriptions of your vision of an ideal world
-requires value judgement
-is an opinion |
|
|
Term
| any economic policy making must include positive and normative economics |
|
Definition
-you must consider the consequences
-policy making requires both |
|
|
Term
|
Definition
-Small
-focuses on decisions of individual consumers and firms |
|
|
Term
|
Definition
- the big picture
- how the economy as a whole works |
|
|
Term
|
Definition
-simplification of the real world that eliminates unwanted detail in order to focus on what is really important
-people get bogged down by details
-use the point to get your vision across |
|
|
Term
|
Definition
| Production Possibilities Frontier |
|
|
Term
| with a PPF we can make Two assumptions |
|
Definition
1. Economy Produces two goods
-with this assumption in mind the PPF will show the Maximum qty of two goods the economy is capable of producing given resources and tech.
- we Can use PPF's to describe efficiency.
-If every point on the PPF is efficient, the point inside the PPF is insufficient or wasteful
- the point outside the PPF is impossible |
|
|
Term
|
Definition
| as the price of a good or service goes up the qty demanded goes down |
|
|
Term
|
Definition
| as the price of a given good increases consumers will substitute other goods whose price has not increased |
|
|
