Microeconomics Chapters 1&2

Front 1

the situation where unlimited wants exceed the limited resources available to fulfill those wants

Back 1

scarcity

Front 2

the study of the choices people make to attain their goals, given their scarce resources

Back 2

economics

Front 3

list three important economic ideas

Back 3

..people are rational
..people respond to incentive
..optimal decisions are made at the margin

Front 4

a simplified version of reality

Back 4

model

Front 5

an institution that brings together buyers and sellers of a good or service

Back 5

market

Front 6

an extra or additional benefit or cost of a decision

Back 6

margin

Front 7

watching tv versus studying -- what is the marginal benefit? what is the marginal cost?

Back 7

benefit: enjoyment
cost: lower grade from having studied less

Front 8

true/false: marginal benefits = marginal costs creates a positive outcome

Back 8

TRUE

Front 9

analysis that involves comparing marginal benefits to marginal costs

Back 9

marginal analysis

Front 10

the idea that because of scarcity, producing more of one good or service means producing less of another good or service

Back 10

trade-off

Front 11

the highest valued alternative that must be given up to engage in an activity

Back 11

opportunity costs

Front 12

your sitting in class learning when you would rather be doing something else.. what is the opportunity cost of going to class?

Back 12

..doing something else you enjoy more. Ex: beach, sleep, work, etc.

Front 13

an economy in which the government decides how economic resources will be allocated (ex: soviet union or cuba)

Back 13

centrally planned economy

Front 14

an economy in which the decisions of households and firms interacting in markets allocate economic resources

Back 14

market economy

Front 15

an economy in which most economic decisions result from the interactions of buyers and sellers in markets, but where the government plays a significant role in the allocation of resources (ex: usa, canada, japan, etc)

Back 15

mixed economy

Front 16

occurs when a good or service is produced at the lowest possible cost

Back 16

productive efficiency

Front 17

occurs when production reflects consumer prefrences -- marginal benefit = marginal cost

Back 17

allocative efficiency

Front 18

a situation in which the buyer and seller of a product are made better off by the situation

Back 18

voluntary exchange

Front 19

best use of resources

Back 19

efficiency

Front 20

the fair distribution of economic benefits

Back 20

equity

Front 21

true/false: equity, equality, and trade-off all relate together

Back 21

TRUE

Front 22

1. decide
2. formulate
3. use
4. revise
5. retain

Back 22

steps to develop a model

Front 23

model are based on making ________.

Back 23

assumptions

Front 24

something measurable that can have different values, such as the wages of software programmers

Back 24

economic variables

Front 25

believed outsourcing would lead to an economic decline

Back 25

Samuelson

Front 26

analysis concerned with "what is" -- describes

Back 26

positive analysis

Front 27

analysis concerned with "what ought to be" -- judges

Back 27

normative analysis

Front 28

the study of how households and businesses make choices, how they interact in markets, and how the government attempts to influence their choices

Back 28

microeconomics

Front 29

the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth

Back 29

macroeconomics

Front 30

the practical application of an invention

Back 30

innovation

Front 31

processes businesses use to create products or services

Back 31

technology

Front 32

total amount recieved for a product

Back 32

revenue

Front 33

revenue - costs

Back 33

profit

Front 34

labor, capital, land

Back 34

factors of production

Front 35

manufactured goods that are used to produce other goods and services (Ex: computers)

Back 35

capital

Front 36

the study of how consumers react to changes in product prices and how firms decide what prices to charge

Back 36

microeconomics

Front 37

study of policy issues, such as reduced smoking, costs and benefits of new drugs, and efficient ways to reduce pollution

Back 37

microeconomics

Front 38

study of the result of government interventions and the comparison between country economics

Back 38

macroeconomics

Front 39

change in y
--------------
change in x

Back 39

slope = opportunity cost

Front 40

2nd yr - 1st yr
---------------------- x 100
1st yr

Back 40

percentage change

Front 41

base x height

Back 41

total revenue / area of a rectangle

Front 42

a curve showing the ATTAINABLE combinations of two products that may be produced with availabile resources

Back 42

production possibilities frontier

Front 43

the highest valued alternative that must be given up in order to engage in an activity

Back 43

opportunity cost

Front 44

the ability of an individual, firms, or country to produce more of one good or service then competitors using the same amount of resources

Back 44

absolute advantage

Front 45

the ability of an individual, firm, or country to produce a good or service at a lower opportunity cost (slope) then other producers

Back 45

comparative advantage

Front 46

the basis for trade is __________.

Back 46

comparative advantage