________: a way in which an individuals pursuit of self- interest can lead, without the individual intending it, to good results for society as a whole.
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Trade
________- off: comparison of costs and benefits of doing something.
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Opportunity cost
________: what you must give up in order to get something, the net benefit of the next best alternative.
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Specialization
________: a country should ________ in the product that they have comparative advantage.
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Market Failure
________: the point at which the individual pursuit of self interest found in markets makes society worse off, that is, the market outcome is inefficient.
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Absolute advantage
________: uses fewer inputs to produce a good.
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Principle 1
choices are necessary because resources are scarce
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Scarce
a resource is scarce when there is not enough of the resource available to satisfy all the various ways a society wants to use it
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Trade-off
comparison of costs and benefits of doing something
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Opportunity cost
what you must give up in order to get something, the net benefit of the next best alternative
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Principle 2
the true cost of something is opportunity cost
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Opportunity cost
involves two items, monetary costs plus subjective costs
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Market economy
an economic system in which the main form of economic organization is the firm, in which the private owners of capital goods hire labor to produce goods and services for sale of markets for projects
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Command Economy
centrally planned economic system, the government has been the institution controlling production and deciding how goods should be distributed, and to whom
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China
quota of food and water, no more, planned out
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Invisible Hand
a way in which an individuals pursuit of self-interest can lead , without the individual intending it, to good results for society as a whole
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Market Failure
the point at which the individual pursuit of self interest found in markets makes society worse off, that is, the market outcome is inefficient
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Offshoring
outsourcing, sending work to other countries
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Principle 3
There are gains from trade
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Absolute advantage
uses fewer inputs to produce a good
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Comparative advantage
greatest absolute advantage or least productivity disadvantage (comparatively better)
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Specialization
a country should specialize in the product that they have comparative advantage
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Flashcard (31)