Unit 1 - Basic Economic Concepts Guide

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47 Terms

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Entrepreneurship
the ability of an individual to coordinate the other categories of resources to produce a good or service.
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Economic growth
a sustained rise in aggregate output and an increase in standard of living (causes are developments in technology, or an increase in resources)
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Scarcity
unlimited wants, limited resources (example: land)
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Theories
to understand behavior are proved via a full procedure of hypothesis and testing.
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Macroeconomics
we consider the big picture- the nations economy as a whole.
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Focuses
is directed at the roles households and firms play and how their decision- making and allocation of resources impact the overall economy.
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private property rights
There are ________ which are protected, however, the government is able to intervene in order to meet societal aims.
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PPC
If the ________ is linear, it has a constant opportunity cost, if it is curved, it has increasing opportunity costs.
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allocate resources
The economy has to decide what goods and services the society needs in order to properly ________.
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Optimal consumption rule
to maximize utility, marginal utility per dollar spend on each good= service in consumption bundle, MUc /Pc= MUt /Pt.
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Comparative Advantage
The ability of a firm to produce a good or service at the lowest possible cost.
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Opportunity costs
This is the cost we forgo or sacrifice, to opt for another choice.
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Microeconomics
filters our scope to individuals in an economy while keeping the overall economy in mind.
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Human capital
education and training an individual has that is used in the production of a good or service.
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Labor
physical labor, skills, and effort devoted into a task where workers are paid.
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Absolute Advantage
Occurs when a firm as the ability to produce a specific amount of goods or services in comparison to the others.
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Capital
is usually referred to as the liquid asset, or monetary value.
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Productive efficiency
lowest cost possible on the PPC.
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Allocative efficiency
the economy allocates resources so consumers are well off as possible, producing what is demanded.
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Physical capital
tools and equipment used to produce a good or service.
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Positive Economics
this approach to economics is based on facts and figures.
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Microeconomics
filters our scope to individuals in an economy while keeping the overall economy in mind
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Land
natural resources and raw material
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Labor
physical labor, skills, and effort devoted into a task where workers are paid
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Capital
is usually referred to as the liquid asset, or monetary value
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Physical capital
tools and equipment used to produce a good or service
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Human capital
education and training an individual has that is used in the production of a good or service
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Entrepreneurship
the ability of an individual to coordinate the other categories of resources to produce a good or service
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Trade-offs
The alternative choice which must be given up in order to make a decision
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Opportunity costs
This is the cost we forgo or sacrifice, to opt for another choice
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Positive Economics
this approach to economics is based on facts and figures
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Normative Economics
this approach to economics is based on assumptions
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Economic growth
a sustained rise in aggregate output and an increase in standard of living (causes are developments in technology, or an increase in resources)
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Productive efficiency
lowest cost possible on the PPC
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Allocative efficiency
the economy allocates resources so consumers are well off as possible, producing what is demanded
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Absolute Advantage
Occurs when a firm as the ability to produce a specific amount of goods or services in comparison to the others
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Comparative Advantage
The ability of a firm to produce a good or service at the lowest possible cost
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Terms of Trade
people split up the work, and provide each other with a good in return for another
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Capital goods
goods that make consumer goods (ex
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Consumer goods
goods that are consumed (ex
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Implicit costs
monetary or non-monetary opportunity costs in terms of making a choice
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Explicit costs
traditional out of pocket costs which are associated with choosing one course of action
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Utility
the measure of personal satisfaction (util is a unit of utility)
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Marginal utility
the change in total utility by consumer one additional unit of that good/service
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Principle of diminishing marginal utility
 additional units of a good/service add less total utility than the previous units do
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Marginal utility per dollar
 MUgood/Pgood (marginal utility of one unit of the good / price of one unit of the good)
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Optimal consumption rule
to maximize utility, marginal utility per dollar spend on each good = service in consumption bundle, MUc/Pc = MUt/Pt