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-condition that arises b/c wants exceed ability of resources to satisfy them
-inability to satisfy wants |
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| -social science that studies choices individuals, businesses, gov'ts, and societies make as they cope with scarcity and the incentives that influence and reconcile those choices |
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| -the objects(goods) and actions(services) people value and produce to satisfy human wants |
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| -choices that are best for th individual who makes them |
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| -choices best for society as a whole |
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| -choice that uses the available resources to best achieve the objective of the person making the choice |
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| -the best thing you must give up to get something else |
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| -previously incurred or reversible cost |
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| -gain or pleasure of something measured by what you are willing to give up |
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| -choice made by comparing all the relevent alternatives systematically and incrementally |
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-opportunity cost that arises from a one-unit increase in an activity
-what you must give up to get one additional unit of something |
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| -arises from one-unit increase in an activity measured by what you are willing to give up to get one additional unit of something |
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| -reward or penalty---"carrot or stick"---that encourages or discourages an action |
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| study of choices that individuals and businesses make and the way these choices interact and influenced by gov'ts |
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| -study of aggregate(total) effects on national/global economy of choices that individuals, businesses, gov'ts make |
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-about what is/facts/right or wrong
-what is believed about world and how it operates |
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-what ought to be
-depends on values
-cannot be tested |
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ceteris paribus
or cet.par. |
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-other things remaining the same
-used to unscramble cause and effect |
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| -tendency for values of two variables to move together in predictable and related way |
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| consumption goods + services |
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| -bought by individuals and used to provide personal enjoyment and contribute to a person's quality of life |
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-bought by businesses to increase their productive resources
ex)autoassembly lines, shopping malls, airplanes, oil tankers, etc. |
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-bought by gov'ts
ex) missiles + weapons systems, travel services, Internet services, police protection, roads, paper + paper clips, etc. |
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| -produced in one country and sold in other countries |
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-used to produce goods + services
- land
- labor
- capital
- entrepreneurship
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-"gifts of nature", natural resources---minerals, water, air, wild plants, animals, birds, fish
-some renewable, some nonrenewable |
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-time + effort devoted to produce
-physical and mental |
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| -knowledge and skill people obtain from education, on-the-job training, and work experience |
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tools, insturments, machines, buildings, and other items that have been produced in the past that businesses still use to produce goods + services
-NOT FINANCIAL CAPITAL |
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| -human resource that organizes labor, land, and capital |
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| -income paid for the use of land |
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| -income paid for the services of labor |
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| -income paid for the use of capital |
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| -income earned by an entrepreneur for running a business |
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| functional distribution of income |
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Definition
| -distribution of income among factors of production (land, labor, capital, and entrepreneurship) |
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| personal distribution of income |
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| -distribution of income among households |
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| -model of economy that shows circular flow of expenditures and incomes that result from decision makers' choices and the way thos choices interact to determine what, how, and for whom goods + services are produced |
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| -individuals or groups of people living together |
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| -institutions that organize the production of goods + services |
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| -any arrangement that brings buyers + sellers together and enables them to get info and do business w/ each other |
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| -markets in which goods + services are bought and sold |
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| -markets in which services of factors of production are bought and sold |
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| -total amount that federal gov't has borrowed to make expenditures that exceed tax revenue---to run a gov't budget deficit |
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based on 2 assumptions:
1)wants are unlimited
2) resources are limited.
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-optimize our choices and behaviors
-economic rationality (making the best possible choice)
-utilitarianism (serving social-interest---what is best for common good)
-greatest good for the greatest number |
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Definition
-labor productivity(econ. jargon for "efficiency")
-production efficiency/consumption efficiency=allocative efficiency→static efficiency(best for here + now)→dynamic efficiency(creates a better future) |
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Definition
-labor theory of value: value depends on the effort of labor used to produce something (Marxist)
-exchange theory of value (1890): value is based on what people are wiling to give up for something (what economics is based upon) |
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Term
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Definition
-first to compile economic history, theory and trends into a science
-Wealth of Nations(1776)
-Invisible Hand:using man's selfishness for greater good
note: did not say selfishness was good or a weak gov't was best |
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Term
| Adam's Smith proposed market system |
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Definition
-wouldn't work w/o strong gov't (but the right gov't)
-free + competitive market system vs. monopoly
-would minimize fraud, coercion, and monopoly
-free trade vs. mercantilism
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Definition
-protectionism: export more than import
-a nation gets wealthy the same way an individual does: sells more than it buys
-logical fallacy - the error of composition |
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Term
| Error/Fallacy of Composition |
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Definition
-assuming something is true as a whole based the truth of only part of the whole
ex) assuming that because an individual gets wealthy by selling more than he buys that this is true for a nation as a whole (mercantilism) |
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| production possibilities frontier |
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Definition
-boundary b/t combinations of goods + services that can be produced and cannot be produced given the available factors of production and the state of technology
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| -situation in which we cannot produce more of one good or service without producing less of something else |
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| -an exchange; giving up one thing to get something else |
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-sustained expansion of production possibilities
- better technology
- improved quality of labor
- more machines to help production
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| Law of Increasing Opportunity Cost |
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Definition
| -as production increases, so does opportunity cost |
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-when quanity demanded equals quantity supplied
-when buyer's and seller's plans are in balance |
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-association: any relationship b/t measured quantities
-causation: relationship b/t measured quantities where one is the cause of the other
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| policy analysis/business application |
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Definition
| -determining which of various alternative policies will most achieve a given set of goals in light of the relations between the policies and the goals |
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Term
| methodology/scientific method |
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Definition
| -observation→hypothesis→prediction |
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