ECON TEST UNIT 1

scarcity

unlimited wants but limited resources

economics

study of choices

scarcity vs. choices

Scarcity is when there are limited resources to meet unlimited wants, and choice is the act of selecting how to use those resources

Microeconomics

focuses on individual economic units

macroeconomics

examines the overall economy as a whole, looking at broader trends like national income, inflation, and unemployment across the entire market

positive statements

based on facts/ avoid judgement

normative statement

includes judgment

marginal analysis def

a method of comparing the additional costs and benefits of an activity

marginal analysis example

marginal benefit of a bottle of water is $6 and the marginal cost is $2, net benefits equal $4

cost

the given amount/worth in $ by the company

price

amount customer is willing to pay

equation for profit

selling price-cost price

consumer goods

created for direct consumption (pizza)

capital goods

created for indirect consumption (oven)

what causes a PPC to shift out/right

increase in the quantity or quality of available resources

what causes PPC to shift in, left

decrease in available resources

trade off

all alternative options available

opportunity cost

next best decision

implicit cost

opportunity cost, representing the value of a resource that could be used elsewhere

explicit cost

direct, out-of-pocket expense

absolute advantage

country or individual can produce more of a good or service than another with the same resources

comparative advantage

country or individual can produce a good at a lower opportunity cost compared to another

centrally planned economy

owns all resources and has all answers to economic questions

command economy

economic system where the government controls the production, distribution, and pricing of goods and services