Term
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Definition
| The study of how people choose to use their limited resources to satisfy their unlimited wants. |
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Term
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| basic requirements for survival ("needs"), as well as things one desires that are not required for survival. |
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Definition
| Things you use to satisfy your wants |
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Term
| What is the fundamental economic problem? |
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Definition
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Term
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Definition
| The condition in which our wants are greater than the resources available to satisfy them. |
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| Economics is about studying the ____ that people make as a result of scarcity |
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Definition
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Term
| What are some examples of scarcity? |
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Definition
| scarce resources as in money or lack of time. |
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Term
| Economists take a ______ approach to _____ |
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Definition
| scientific, decision making |
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Term
| Economic thinking develops _____ which can be used to _____ the choices people will make. For example, _______ |
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Definition
| decision-making skills, predict, rational cost-benefit analysis |
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Term
| What is positive economics and an example of it? |
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Definition
| Positive economics (economists describe the unemployment rate over time due to the year-over-year inflation rate was 8.5% in July 2022. Describes how things are and why). |
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| What is normative economics and what is an example of it? |
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Definition
| Normative economics (economists recommend steps the government can take to reduce inflation. Determines the best choice based on specific criteria; involved in making policy decisions). |
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Term
| What is the first principle of economics? |
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Definition
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Term
| What is an xample of scarcity forcing choices? |
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Definition
| When you only have enough money to buy one thing or the other but not both |
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Term
| What is the no-free-lunch-principle? |
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Definition
| The idea that even if you dont pay for something (for example, the school lunch is free) someone still has to pay (our parents via taxes towards the government which funds our lunches) |
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Term
| What is principle 2 of economics? |
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Definition
| choices have costs and benefits |
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Term
| What is cost-benefit analysis? |
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Definition
| cost-benefit analysis helps us understand which choice to make by weighing both costs (money, time, effort, other sacrifices) and benefits (positives, what you gain). Rational people choose something when the benefits of doing so are greater than the costs. |
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Term
| What are some examples of costs of college? |
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Definition
| Missing old friends, heavy workload, years of studying |
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Term
| What are some examples of benefits of attending college? |
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Definition
| makes parents proud, gets me a well paying job, allows me to meet new people |
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Term
| Thinking-at-the-margin-principle: |
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Definition
| most choices involve thinking in terms of a little more or a little less of something, rather than "all or nothing" so we engage in comparing Marginal Costs and Benefits |
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Term
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Definition
| what you give up to add one more unit of something |
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Term
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Definition
| what you gain from one more unit of something |
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| something that motivates a person to take a particular course of action. |
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Term
| why do economists pay attention to incentives? |
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Definition
| to understand why people do what they do |
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Term
| What is a positive incentive |
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Definition
| a reward that is used to encourage a behavior. For example: money, praise, grades, awards, financial bonuses. |
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Term
| What is a negative incentive? |
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Definition
| a punishment that is used to discourage a behavior. For example:taking away something valuable, fewer choices, jail |
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Term
| Law of unintentional consequence: |
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Definition
| the actions of people and governments often have effects that are unexpected. For example: Cobra problem in Dehli, removal of freeway borders. |
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Term
| What is principle 4 of economics |
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Definition
| Future consequences count. When people make decisions, they are short-sighted and tend to be most concerned with immediate costs/benefits.Part of thinking like an economist involves trying to think of all the possible consequences of a decision, including foreseeable long-term consequences. |
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Term
| What is principle 5 of economics |
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Definition
| Trade makes people better off. |
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Term
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Definition
| the voluntary exchange of goods and services |
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Term
| Why was The Wealth of Nations important |
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Definition
| it became the basis of modern free market economic theories |
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Term
| when was The Wealth of Nations written |
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Definition
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Term
| who wrote The Wealth of Nations and why is he important |
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Definition
| Adam Smith and he was considered the "father of economics" |
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Term
| What is the "trade makes people better off principle" |
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Definition
| by focusing on what we do well and then trading with others for what they do well, we will end up with more and better choices than by trying to do everything ourselves |
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Term
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Definition
| doing one task/job very well |
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Term
| How does specialization encourage trade? |
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Definition
| people no longer produce everything for themselves and you must trade to obtain things they do not produce. |
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Term
| What is division of labor? |
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Definition
| breaking up production into specialized tasks for increased productivity. It increases how fast things are created and the quality of things that are created. |
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Term
| Specialization makes us more ____ while trade makes us ____ |
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Definition
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Term
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Definition
| the total value of all the things a person owns |
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Term
| How can trade promote wealth? |
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Definition
| gets goods to those who value them, increases the quantity and variety of goods available to buyers by giving them access to different markets, and lowers the cost of goods (fives buyers access to cheaper products and gives producers access to larger markets which enables mass production) |
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Term
| What is standard of living? |
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Definition
| level of wealth, comfort, material goods, and necesities available to a person or community. |
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Term
| what is the relationship between specialization and standard of living? |
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Definition
| If you specialize, and then buy what you want, you will have a higher standard of living. It is a strong relationship. |
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Term
| What is the 6th principle of economics |
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Definition
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Term
| What is the markets coordinate trade principle? |
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Definition
| free markets usually do better than anyone else at coordinating exchanges between buyers and sellers. |
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Term
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Definition
| any arrangement that brings buyers and sellers together to do business with each other |
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Term
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Definition
| a market with little or no government interference. Buyers and sellers trade until satisfied. |
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Term
| What is the invisible hand and who came up with it |
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Definition
| Adam Smith came up with the invisible hand metaphor which states that when all of the individual consumers and producers in a society pursue their own self-interest, the best interests of society as a whole are fulfilled . |
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Term
| Shat is rational behavior model? |
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Definition
| a model which states that people behave rationally by making self-interested decisions that they think will fulfill their wants and needs to the greatest extent possible. |
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