Untitled Flashcards Set

Economics

The study of how individuals and societies allocate their limited resources to satisfy their unlimited wants.

Microeconomics

A branch of economics that analyzes individual and firm-level decisions, such as consumer behavior and market interactions.

Macroeconomics

A field of economics that studies the economy as a whole, addressing large-scale issues like national productivity and inflation rates.

Rationality Assumption

The assumption in economics that individuals act rationally to maximize their utility based on available information.

Positive Statements

Objective assertions that can be tested and validated, describing 'what is.'

Normative Statements

Subjective claims based on opinions or beliefs, prescribing 'what ought to be.'

Ceteris Paribus

A Latin phrase meaning 'all other things being equal,' used to isolate the effect of one variable.

Free-Riding

The situation where individuals benefit from resources or services without paying for them.

Scarcity

A universal problem where resources are limited while human wants are unlimited.

Production Possibility Curve (PPC)

A graph that shows the maximum feasible combinations of two goods that can be produced with available resources.

Attainable Points

Combinations of goods that can be produced with available resources on the PPC.

Unattainable Points

Combinations that cannot be achieved with current resources on the PPC.

Inefficient Points

Combinations where resources are not fully utilized on the PPC.

Concave PPC

The PPC is concave due to the law of increasing opportunity costs.

Factors Causing the PPC to Shift Outward

Economic growth, technological advancements, or an increase in resources.

Inferior Goods

Goods for which demand decreases as consumer income rises.

Normal Goods

Goods for which demand increases as consumer income rises.

Relative Price

The price of one good in terms of another good.

Free Rider Problem

The issue arising when individuals consume a good without contributing to its cost.

Consequences of Price Ceilings

Price ceilings can result in shortages, black markets, and reduced quality of goods.

Government Corrections for Negative Externalities

Governments can impose taxes, regulations, or fines to reduce activities that cause negative externalities.