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Economics and Personal Finance > Module 1: Basic Economic Concepts > Flashcards

Module 1: Basic Economic Concepts Flashcards

1
Q

What is economics?

A

The study of how society chooses to use its scarce resources for the production of goods and services to satisfy unlimited wants

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2
Q

What is opportunity cost?

A

The most desirable alternative given up as the result of a decision

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3
Q

What is the PACED model?

A 
Define the PROBLEM
List the ALTERNATIVES
List the CRITERIA
EVALUATE your choices
Make a DECISION
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4
Q

Who is the father of modern economics?

A

Adam Smith

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5
Q

What are the 6 characteristics of the market economy?

A 
Private ownership
Limited government
Competition
Consumer Sovereignty
Profit Motive 
Voluntary Market Exchange
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6
Q

What is consumer sovereignty?

A

Consumers determine which products and services will be made based on where they choose to spend their money

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7
Q

What is an incentive?

A

A way of encouraging or discouraging behavior.

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8
Q

Waht are the 3 basic economic questions?

A

What will be produced?
How will the goods and services be produced?
For whom will they by produced?

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9
Q

In a command economy, who answers the 3 basic economic questions?

A

The government

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10
Q

What are the four economic systems?

A

Market
Mixed
Command
Traditional

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11
Q

What is the theory of the invisible hand?

A

The market forces of supply and demand should drive the economy.

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12
Q

What is scarcity?

A

The condition of not being able to have all of the goods and services one wants

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13
Q

What are the four factors of production?

A

Labor (Human Resources)
Land (Natural Recsrouces)
Capital Resources
Entrepreneurship

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14
Q

What is a trade-off?

A

When you give something up to gain something else

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15
Q

What does the Production Possibilities Curve (PPC) illustrate?

A

The maximum amount of output that can be produced using the current resources and technology

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16
Q

What is marginal benefit?

A

When doing something leads you to be better off by doing more of it

17
Q

What is marginal cost?

A

When doing something leads you to be worse off by doing more of it - so you could do less of it

18
Q

When making a marginal decision - should the marginal benefit or marginal cost be more?

A

Marginal benefit should always outweight marginal cost for you to continue to do something. You should stop when marginal cost is equal to marginal benefit. You should not do something in the first place if marginal cost is greater than marginal benefit.

19
Q

What is an unintended consequence?

A

An outcome or result that we do not expect to occur due to a choice

20
Q

What id entrepreneurship?

A

Introducing new products of production processes in hopes of making a profit

Economics and Personal Finance (1 decks)

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