Intro to Economics and Circular Flow Diagram (ECO 2105)

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A set of practice flashcards covering key concepts from the economics intro lecture: definition of economics, scarcity, opportunity cost, rational behavior, marginal analysis, specialization, micro vs macro, circular flow diagram, and related terms.

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26 Terms

1
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What is economics the study of, according to today's lecture?

How humans make decisions in the face of scarcity, balancing infinite wants with limited resources.

2
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What are the two keywords highlighted for the economics definition in the lecture?

Decision making and resources (scarcity).

3
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What does scarcity mean in economics?

The limited availability of resources; we cannot have everything we want.

4
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What is opportunity cost?

The value of the next best alternative forgone when making a decision; the sacrifices in time, money, or options.

5
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What does the phrase 'no free lunch' imply in economics?

Every decision has costs and trade-offs; there are always consequences.

6
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What is specialization of labor?

The division of labor where individuals or societies focus on a narrow set of tasks to increase efficiency.

7
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What are the three economic perspectives introduced in the lecture?

Scarcity/choices, purposeful behavior (rational behavior), and marginal analysis.

8
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What does 'self-interest' mean in this context?

Rational decisions guided by personal goals or happiness (maximizing utility).

9
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What is 'utility' in economics?

Happiness or satisfaction from consuming goods or services.

10
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What is 'marginal analysis'?

Analyzing the additional benefits and costs of one more unit before making a decision.

11
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What is an economic model, like the circular flow diagram?

A simplified representation used to visualize relationships in the economy.

12
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What is the Circular Flow Diagram?

A model showing how households and firms interact through product and resource markets, with real flows and money flows.

13
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Who are the two primary economic agents in the circular flow diagram?

Households and firms (businesses).

14
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What are the two markets in the circular flow model?

Product market (goods and services) and resource market (labor and inputs).

15
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What are the 'real flows' in the circular flow model?

The physical movement of inputs and outputs—labor, land, goods, and services.

16
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What are the 'money flows' in the circular flow model?

The movement of money payments for wages, rents, profits, and purchases of goods/services.

17
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What role do households play in the circular flow diagram?

They supply resources (labor, land) and demand goods/services; they earn income and spend.

18
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What role do firms play in the circular flow diagram?

They hire resources from households and produce/sell goods and services; they pay wages and profits.

19
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What is the difference between inputs/resources and outputs/products in the model?

Inputs/resources are used to produce; outputs/products are what is produced and sold.

20
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What is GDP?

Gross Domestic Product—the total value of all final goods and services produced in an economy (macro concept).

21
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What do inflation and unemployment represent in macroeconomics?

Inflation is the rate at which the general price level rises; unemployment is the number or share of people actively seeking work but not employed.

22
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What is the difference between microeconomics and macroeconomics?

Micro focuses on individuals, firms, households, and markets; macro studies economy-wide aggregates and indicators.

23
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In a transaction, what are the two sides of the market?

Buyers and sellers; demand and supply determine who pays and who earns.

24
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What is the two-sides concept in market transactions as discussed in the lecture?

Two sides: buyers (demand) and sellers (supply).

25
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How is attendance graded described in the lecture?

The attendance grade is dynamic and updated after each class; it starts low and grows over time.

26
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What is the basic rule of marginal benefit vs. marginal cost in decision making?

Proceed with a choice if the marginal benefit exceeds the marginal cost (MB > MC).