Studied by 1 personEconomics
The study of how decisions are made by people and how people seek to satisfy wants and needs in a world full of limited resources.
Scarcity
Limited resources with unlimited wants and needs.
Resource
Anything used to produce a good and/or service.
Factors of Production
Land, Labor, Capital, and Entrepenuer.
Rival resource
Resource that can only be used once or by a single person.
non rival resource
resource that can used simultaneously.
incentives
motivations for decisions
positive incentive
expected reward
negative incentives
expected punishment
trade off
give up something in exchange for something else.
opportunity cost
value of what’s given up in a trade off
microeconomics
the study of choices made by individuals.
macroeconomics
the study of choices made by nations
positive economics
economic analysis that can be proven based on facts.
normative economics
economic analysis involving value and judgement.
command economy
centrally planned economy
father of communism
Karl Marx
free market
individuals make all decisions
father of capitalism
Adam Smith
mixed economy
combination of command and free market economy
cost benefit analysis
process of accounting for all for all potential losses and gains when making a trade off.
marginal analysis
examination of the benefit and cost of production
marginal benefit
the additional benefit from an additional unit.
marginal cost
the additional cost from an additional unit.
explicit cost
out of pocket payments that are actually made
implicit cost
value of benefits that are foregone.
to calculate marginal cost
subtract current total with past total cost
to calculate marginal benefit
subtract current total benefit with past total benefit.
inefficient; unemployment; contraction; recession
points below/inside curve/line
full of employment; natural rate of employment
points in the line/curve
impossible/expansion
points outside/above the curve/line
to calculate net
subtract total benefit and total cost
when will net benefit be maximized?
at the point where MB=MC
productive efficiency
using limited resources to their full potential
allocative efficiency
maximized benefits/makes society best off
constant opportunity cost
same opportunity cost between all parts
law of increasing opportunity cost
as you produce more of a good, the opportunity cost will increase → Resources aren’t as easily adaptable.
Note
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