Flashcards in 1: Principles of microeconomics Deck (5)
What is scarcity? What do people do because of scarcity? How is this activity influenced?
1. Inability to satisfy all wants
2. People make choices
3. Choices depend on incentives (reward to encourage or penalty that discourages an action)
Describe the what, how, and for whom goods and services get produced
What: What products/services are made
How: How factors of production are used to produce goods/services
For whom: Who gets the goods/services depending on income (Land-rent, Labor-wages, Capital-interest, Entrepreneurship-profit)
A choice is a ? (Benefit & Cost)
Tradeoff. Comparing benefit and costs.
(Benefit: gain/pleasure a choice brings, determined by preferences.
Cost: Opportunity cost- the highest-valued alternative that must be given up)
What is a margin? (MB & MC)
Where the "how much" choice is made.
Marginal benefit: Benefit of doing/getting one more
Marginal cost: Opportunity cost of doing/getting one more