Introductory Microeconomics

Introductory Microeconomics Flashcards to Study for Midterms

economics

making choices to cope with scarcity, such as water and land, including the division of labor and production

a main cause of world problems (why study economics?)

issues with allocation

microeconomics

studies individual consumers and firms, up to the market level, and what macro is based on

macroeconomics

studies economy as a whole, including growth, employment, inflation and total imports/exports (in/out of a country)

theory

a simplified and more abstract representation that makes predictions, like gravity

model

an applied representation that makes predictions, like maps or modelsof real-world scenarios to understand complex systems.

how households serve firms

provides money to purchase goods and services

how firms serve households

provides wages to receive production inputs to make goods and services

budget constraint

a limit of how much a consumer can spend with their income on goods, and how it varies depending on the amount of each item

opportunity cost

what is given up to get something in order to get something else

utility

how allocation is chosen, representing the total satisfaction from a good or service

marginal utility

how allocation is chosen, where satisfaction diminishes with each extra unit of a good or service is added

production possibilities frontier (PPF)

a curve that shows the feasible choices for a combination of goods that will use services the most efficiently

production efficiency

the optimal use from a combination of services represented on a PPF

allocative efficiency

the use of goods in a way that tends to societal and more specific needs

comparative advantage

the use of specialization between people in order to maximize efficient output through trade