Term
- Study of how people chose to use their resources
- Studies the allocation of scarce resources in response to unlimited wants
- Choice
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Definition
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Term
- Scarcity
- Opportunity Cost
- Marginal Analysis
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Definition
Most economic models have which three common elements/concepts?
These three concepts form the base upon which economics is built. |
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Term
Poverty
Even the rich want more
People want far more than their current resources allow |
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Definition
| Scarcity should not be confused with what economic status? |
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Term
Making trade-offs
- the value of the best forgone alternative use
- the value of the good's least important use, which people would forgo if they had one less unit |
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Definition
| What does Opportunity Cost imply in economics? |
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Term
- the analysis of the benefits and cost of the marginal unit of a good or input
- best value, maximize through decision made |
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Definition
| How is Marginal Analysis primarily used? |
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Term
| Within DoD to guide or support decisions on the "worth" of pursuing any form of action that departs from the status quo or do nothing scenario |
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Definition
| Why is an Economic Analysis commonly used? |
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Term
- when deciding whether to commit resources to a new project or program with total investment costs over 1M
or annual recurring costs over 250K for at least four years
other criteria:
- proposing a housing or utilities privatization project, regardless of investment cost
- procuring, modernizing, or upgrading systems that are not themselves IT systems to support the Clinger-Cohen Act
- Secretariat or Air Staff, or commanders of Field units direct an EA study. |
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Definition
| When is an Economic Analysis required? |
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Term
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Environmental or hazardous waste reduction
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OSD or higher authority directs a new or modified program and specifies how to accomplish program goals
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Congress mandates the alternative that must be taken
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Legislation specifies that the project is exempt
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Cost of doing such analysis outweighs the potential benefits
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Definition
| When is an EA not required? |
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Term
help the decision-maker by identifying significant factors,
by clarifying the differences and similarities,
by quantifying & enumerating characteristics |
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Definition
| It is important to note that economic analysis is a process to help do what? |
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Term
| element that differentiates economic analyses from cost estimation |
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Definition
| What is the concept of discounting? |
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Term
| the loss of the purchasing power of a dollar due to the general rise of prices in the economy |
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Definition
| What does inflation accounts for? |
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Term
Interest - expressed in dollars and represents the money paid or received over time
Interest Rate - a percentage that expresses the fraction of cost or return on the principal over time |
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Definition
| What is the difference between Interest vs Interest Rate? |
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Term
Base Year - without inflation
Then-Year - with inflation dollars |
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Definition
| What is base year and then-year? |
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Term
Nominal Rate
or
Real Rate |
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Definition
| Interest rates can be depicted in one of two forms? |
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Term
rate of return used for payments that include inflation
i.e., cash flows measured in current or then year dollars
loans and returns from banks communicated to customer as nominal rate |
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Definition
| What is nominal interest rate? |
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Term
nominal rate adjusted to eliminate the effect of anticipated inflation/deflation
and
used for payments that are in terms of stable purchasing power
cash flows measured in constant or base year dollars |
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Definition
| What is real interest rate? |
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Term
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End-of-Year (EOY)
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Middle-of-Year (MOY) - preferred - greater accuracy
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Beginning-of-Year (BOY)
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Continuous Method
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Definition
Name the four commonly accepted discounting conventions?
- estimating timing for a cost or benefit |
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Term
interest rate used to determine the present value of a future cash stream
the opportunity cost of making the investment |
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Definition
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