Econ 101 Test 1

microeconomics

small, individual transactions, markets, product pricing. Individual decision making in economy

macroeconomics

big picture. entire economy. Economic variables: unemployment, inflation, GDP (what we produce)

GDP

the total money value of all final goods and services produced within a country during a specific time period

resources

any item used to produce goods and services

Types of resources

land, labor, capital, entreprenurial ability

land

type of resource. everything that nature provides

labor

type of resource. human work contribution. both physical and mental

capital

type of resource. anything that was produced that gets used to produce other things. Physical and human (knowledge, training, educations that improve productivity)

entrepreneurial ability

human contribution, but using different services.

scarcity

applied to items of value. to determine we see if it was free if theres enough for everyone. scarcity is relative.

oportunity cost

the loss of the next best alternative when you make a decision

rational decision making rule

if MB is equal to or greater than the MC of a decision - DO IT

If MB is less than the MC - DON'T DO IT

decreasing marginal cost

inverse relationship between the marginal benefit associated with the use of a good or service and the quantity consumed

increasing marginal cost

additional cost associated with each successive unit of an activity increase

optimal level of output

the level of output at which the marginal benefit of the last unit produced and consumed is equal to the marginal cost of that unit

self interest

idea that people choose to do the things that interest them

Marginal benefit (MB)

additional benefit associated with one more unit of an activity

Marginal cost (MC)

additional cost associated with one more unit of an activity

marginal decision making

process of making choices in increments by evaluating the additional, or marginal benefit against the additional, or marginal cost of an action

GDP Real Growth Rate

[(New GDP- old GDP)/ Old GDP] * 100

economics

how people make choices in a world of scarcity

allocation

the process of assigning a good, service, or reasource to one use instead of another

relative scarcity

the comparison of the scarcity of one good, service, or resource to that of another. EX: drinkable water and water

Determinants of Demand

tastes and preferences, income (normal and inferior), number of buyers, expectations, substutions and compliments.

Determinates of Supply

Resource costs, technology, taxes, subsucities, number of sellers, future price expectations.

Reason for downward sloping demand curve

income effect, substution effect, diminishing marginal utility