Studied by 10 people
Need (in terms of economics)
Something that does not have a substitute
Free (in terms of economics)
Something that has absolutely no cost to any person, place, or thing
Five Powers of Economic Thinking
Resources cost more than you think
Prices are signals to producers and consumers
All economic behavior is rational
All economic decisions are made at the margin
People are maximizers
Normative statement
Statement of opinion
Positive statement
Statement of fact
Scarcity
Unlimited wants, but limited resources
Factors of production
Land, labor, capital, and entrepreneurship
Opportunity cost
Cost of the next best alternative
Fundamental questions of economics
What should be produced?
How are we going to produce it?
Who is the consumer?
Command system
Government owned property, government control of production and distribution, government control of employment and inflation, central planning
Market system
Private property, free enterprise/free choice, self-interest, competition, specialization used to lower costs, use of money as a medium of exchange, limited role of government, individual decision
Allocative efficiencies
Any point that consumers are happy with
Productive efficiencies
Any point on the production possibilities curve
Advantage of international trade
Leads to growth; leaves time for other matters
Absolute advantage of international trade
Ability to produce at a lower cost
Comparative advantage
Ability to produce at a lower opportunity cost
Note 
Flashcard (20)