Unit 1 - Basic Economic Concepts Guide

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Entrepreneurship

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47 Terms

1

Entrepreneurship

the ability of an individual to coordinate the other categories of resources to produce a good or service.

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2

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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3

Scarcity

unlimited wants, limited resources (example: land)

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4

Theories

to understand behavior are proved via a full procedure of hypothesis and testing.

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5

Macroeconomics

we consider the big picture- the nations economy as a whole.

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6

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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7

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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8

PPC

If the ________ is linear, it has a constant opportunity cost, if it is curved, it has increasing opportunity costs.

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9

allocate resources

The economy has to decide what goods and services the society needs in order to properly ________.

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10

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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11

Comparative Advantage

The ability of a firm to produce a good or service at the lowest possible cost.

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12

Opportunity costs

This is the cost we forgo or sacrifice, to opt for another choice.

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13

Microeconomics

filters our scope to individuals in an economy while keeping the overall economy in mind.

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14

Human capital

education and training an individual has that is used in the production of a good or service.

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15

Labor

physical labor, skills, and effort devoted into a task where workers are paid.

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16

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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17

Capital

is usually referred to as the liquid asset, or monetary value.

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18

Productive efficiency

lowest cost possible on the PPC.

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19

Allocative efficiency

the economy allocates resources so consumers are well off as possible, producing what is demanded.

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20

Physical capital

tools and equipment used to produce a good or service.

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21

Positive Economics

this approach to economics is based on facts and figures.

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22

Microeconomics

filters our scope to individuals in an economy while keeping the overall economy in mind

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23

Land

natural resources and raw material

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24

Labor

physical labor, skills, and effort devoted into a task where workers are paid

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25

Capital

is usually referred to as the liquid asset, or monetary value

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26

Physical capital

tools and equipment used to produce a good or service

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27

Human capital

education and training an individual has that is used in the production of a good or service

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28

Entrepreneurship

the ability of an individual to coordinate the other categories of resources to produce a good or service

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29

Trade-offs

The alternative choice which must be given up in order to make a decision

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30

Opportunity costs

This is the cost we forgo or sacrifice, to opt for another choice

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31

Positive Economics

this approach to economics is based on facts and figures

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32

Normative Economics

this approach to economics is based on assumptions

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33

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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34

Productive efficiency

lowest cost possible on the PPC

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35

Allocative efficiency

the economy allocates resources so consumers are well off as possible, producing what is demanded

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36

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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37

Comparative Advantage

The ability of a firm to produce a good or service at the lowest possible cost

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38

Terms of Trade

people split up the work, and provide each other with a good in return for another

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39

Capital goods

goods that make consumer goods (ex

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40

Consumer goods

goods that are consumed (ex

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41

Implicit costs

monetary or non-monetary opportunity costs in terms of making a choice

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42

Explicit costs

traditional out of pocket costs which are associated with choosing one course of action

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43

Utility

the measure of personal satisfaction (util is a unit of utility)

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44

Marginal utility

the change in total utility by consumer one additional unit of that good/service

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45

Principle of diminishing marginal utility

additional units of a good/service add less total utility than the previous units do

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46

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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47

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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