Test 2
Economics 1213 with Huston at Oklahoma Christian University of Science & Arts
About this deck
By: lena baskin
Created: 2011-05-11
Size: 27 flashcards
Views: 3
Created: 2011-05-11
Size: 27 flashcards
Views: 3
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economy
greek word for "one who manages a houshold"
economics
study of how society manages its SCARCE resources
what are household and economy facing decision
who will work?
what goods and how many of them should be produced? (gov. est)
what resources should be used in production?
at what price should the goods be sold/purchased
what goods and how many of them should be produced? (gov. est)
what resources should be used in production?
at what price should the goods be sold/purchased
why is management of resources impt
cause resources are scarse
scarcity
means that society has limited resources and therefore cannot produce all the goods and services people wish to have
( what you need vs supply)
( what you need vs supply)
how people make decisions (principles of economics)
1. people face tradeoffs
2. the cost of something is what you give up to get it
3. rational people think at the margin
4. people respond to incentives
2. the cost of something is what you give up to get it
3. rational people think at the margin
4. people respond to incentives
how people interact with each other ( principles of economics)
5. trade can make everyone better off
6. markets are usually a good way to organize economic activity
7. governments can sometimes improve economic outcomes
6. markets are usually a good way to organize economic activity
7. governments can sometimes improve economic outcomes
the force that trends that affect how the economy as a whole works (principles of economics)
8. the standard of living depends on a country's production ( how much you make isn't your standard of living)
9. prices rise when the government prints too much money (inflation)
10. society faces a short-run tradeoff between inflation and unemployment
9. prices rise when the government prints too much money (inflation)
10. society faces a short-run tradeoff between inflation and unemployment
principle 1. people face tradeoffs
~"there is no such thing as a free lunch."
~to get one thing, we usually have to give up another thing
~make decisions requires trading off one goal against another
~guns vs butter!
~to get one thing, we usually have to give up another thing
~make decisions requires trading off one goal against another
~guns vs butter!
efficiency (principle 1)
means society gets the most that it can from its scarce resources. (capitolism)
~advancement of society
~means some will get them and some won"t
~advancement of society
~means some will get them and some won"t
equity (principle 2)
means the benefits of those resources are distributed fairly among the members of society (communism)
~everyone gets a slice of the pie
~equality of society
~everyone gets a slice of the pie
~equality of society
principle 2: the cost of something is what you give up to get it
~decisions require comparing costs and benefits of alternatives
~the opportunity cost
~Kobe bryant sacrifice education for a few million
~the opportunity cost
~Kobe bryant sacrifice education for a few million
opportunity cost
cost of an item is what you give up to obtain that item
principle 3: rational people think at the margin
~marginal changes
~people make decisions by comparing costs and benefits at the margin
~leads to est. a cost/benefit analysis or CBA
~people make decisions by comparing costs and benefits at the margin
~leads to est. a cost/benefit analysis or CBA
principle 4: people respond to incentives
~marginal changes in costs or benefits motivate people to respond
~decisions to choose one alternative over another occurs when that alternative's marginal benefits exceed its marginal costs
~decisions to choose one alternative over another occurs when that alternative's marginal benefits exceed its marginal costs
principle 5: trade can make everyone better off
~people gain from their ability to trade with one another (get much better stuff)
~competition results in gains from trading
~trade allows people to specialize in what they do best (comp. adv)
~competition results in gains from trading
~trade allows people to specialize in what they do best (comp. adv)
comparative advantage
i do what i do better and cheaper than anyone else
principle 6: markets are usually a good way to organize economic activity
market economy
supply and demand module
adam smith made the observation that households and firms interacting in markets act if guided by invisible hand
supply and demand module
adam smith made the observation that households and firms interacting in markets act if guided by invisible hand
market economy
an exonomy that allocates resources through the decentralized decisions of many firms and housholds as they interact in markets for goods and services
~households decide what to buy and who to work for
~households decide what to buy and who to work for
principle 7: governments cna sometimes improve market outcomes
market failure- when market fails the gov. can intervene to promote efficiency and equity
market failure
occurs when the market fails to allocate resources efficiently
externality
which is the impact of one person of firm's actions on the well-being of a bystander
market power
which is the ability of a single person or firm to unduly influence market prices (Bill Gates and microsoft)
principle 8: standard of living depends on a country's production
standard living economically speaking, may be measured in different ways
1. by comparing personal incomes
2. by comparing the total market value of a nation's production (compare PPD)
1. by comparing personal incomes
2. by comparing the total market value of a nation's production (compare PPD)
productivity
is the amount of goods and services produced from each hour of a worker's time (measure productivity)
principle 9: prices rise when the gov prints too much money
~ inflation is an increase in the overal level of prices in the economy
~one cause of inflation is the growth in the quantity of money
~when gov creates large quantities of money , the value of money falls
~one cause of inflation is the growth in the quantity of money
~when gov creates large quantities of money , the value of money falls
principle 10: society faces a short run tradeoff between inflation and unemployment
the phillips curve illustrates tradeoff : decrease in inflation raises unemployment
About this deck
By: lena baskin
Created: 2011-05-11
Size: 27 flashcards
Views: 3
Created: 2011-05-11
Size: 27 flashcards
Views: 3
About StudyBlue
STUDYBLUE makes things that make you better at school.
Things like online flashcards with photos and audio.
Things like personalized quizzes and friendly reminders about when (and what) to study next.
Think of it as a digital backpack™: access to all of your study materials online and on your phone.
STUDYBLUE exists to make studying efficient and effective for every student, for free. Join us.
“Simply amazing. The flash cards are smooth, there are many different types of studying tools, and there is a great search engine. I praise you on the awesomeness.”
Dennis
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