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Flashcards in Chapter 1-5 Deck (46)
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1
Q

economics

A

the study of the allocation of our limited resources to satisfy our unlimited wants

2
Q

resources

A

inputs used to produce goods and services

3
Q

the economic problem

A

Scarcity forces us to choose, and choices are costly because we must give up other opportunities that we value

4
Q

macroeconomics

A

the study of the aggregate economy, including the topics of inflation, unemployment, and economic growth

5
Q

aggregate

A

the total amount—such as the aggregate level of output

6
Q

microeconomics

A

the study of the smaller units within the economy, including the topics of household and firm behaviour and how they interact in the marketplace

7
Q

theory

A

an established explanation that accounts for known facts or phenomena

8
Q

hypothesis

A

a testable proposition

9
Q

empirical analysis

A

the examination of data to see if the hypothesis fits well with the facts

10
Q

ceteris paribus

A

holding everything else constant

11
Q

correlation

A

two events that usually occur together

12
Q

causation

A

when one event causes another event to occur

13
Q

fallacy of composition

A

Even if something is true for an individual, it is not necessarily true for a group.

14
Q

positive analysis

A

an objective, value-free approach, utilizing the scientific method

15
Q

normative analysis

A

a subjective, biased approach

16
Q

scarcity

A

the situation that exists when human wants exceed available resources

17
Q

labour

A

the physical and mental effort used by people in the production of goods and services

18
Q

land

A

the natural resources used in the production of goods and services

19
Q

capital

A

the equipment and structures used to produce goods and services

20
Q

human capital

A

the productive knowledge and skill people receive from education and on-the-job training

21
Q

entrepreneurship

A

the process of combining labour, land, and capital together to produce goods and services

22
Q

goods

A

items we value or desire

23
Q

services

A

intangible acts that people want

24
Q

bads

A

items that we do not desire or want

25
Q

opportunity cost

A

the highest or best forgone opportunity resulting from a decision

26
Q

marginal thinking

A

focusing on the additional, or incremental, choices

27
Q

rule of rational thinking

A

Individuals will pursue an activity if the expected states that individuals will pursue an activity if they expect the marginal benefits to be greater than the marginal costs, or E(MB)>E(MC)

28
Q

net benefits

A

the difference between the expected marginal benefits and expected marginal costs

29
Q

positive incentives

A

incentives that either reduce costs or increase benefits, resulting in an increase in the activity or behaviour

30
Q

negative incentives

A

incentives that either increase costs or reduce benefits, resulting in a decrease in the activity or behaviour

31
Q

specializing

A

concentrating on the production of one, or a few, goods or services, allows them to make the best use of their limited resources.

32
Q

comparative advantage

A

occurs when a person or a country can produce a good or service at a lower opportunity cost than others can

33
Q

consumer sovereignty

A

consumers vote on economic affairs with their dollars in a market economy

34
Q

command economy

A

The government uses central planning to coordinate most economic activities.

35
Q

market economy

A

Goods and services are allocated based on the private decisions of consumers, input suppliers, and firms.

36
Q

mixed economy

A

Government and the private sector together determine the allocation of resources.

37
Q

labour-intensive

A

production that uses a large amount of labour

38
Q

capital-intensive

A

production that uses a large amount of capital

39
Q

economic theories

A

statements used to explain and predict patterns of human behaviour, that through abstractions, provide a broad view of human economic behaviour.

40
Q

why are observations and predictions more difficult in the social sciences

A

With its focus on human behaviour, which is more variable and less predictable, observation and prediction are more difficult in the social sciences.

41
Q

why are “free lunches” not free

A

Because the production of any good uses up some of society’s resources, there is no such thing as a free lunch.

42
Q

how specialization and trade lead to greater wealth and prosperity

A

Specialization and trade increase wealth by allowing a person, a region, or a nation to specialize in those products that it produces at a lower opportunity cost and to trade for those products that others produce at a lower opportunity cost.

43
Q

3 questions every society faces

A
  1. what to produce
  2. how are the goods and services produced
  3. who will get the goods and services
44
Q

what to produce

A

In a decentralized market economy, millions of buyers and sellers determine what and how much to produce. In a mixed economy, the government and the private sector determine the allocation of resources.

45
Q

how to produce

A

The best form of production is the one that conserves the relatively scarce (more costly) resources and uses more of the abundant (less costly) resources. When capital is relatively scarce and labour is plentiful, production tends to be labour-intensive. When capital is relatively abundant and labour is relatively scarce, production tends to be capital-intensive.

46
Q

who will get the goods and services

A

In a market economy, the amount of goods and services one is able to obtain depends on one’s income. The amount of one’s income depends on the quantity and the quality of the scarce resources that the individual controls.