ECO1001 Topic 1: Costs & Benefits - Fill-in-the-Blank Flashcards

Fill-in-the-blank flashcards covering key concepts from Topic 1 (Ch. 1-2), including scarcity, tradeoffs, opportunity cost, micro/macro economics, the ten principles, positive vs normative statements, and models.

The fundamental economic problem is: __.

resources are scarce.

Scarcity: the society’s resources are relative to our wants.

limited

The opportunity cost of any item is .

the highest-valued option forgone

Microeconomics studies how make decisions and how they interact in markets.

households and firms

Macroeconomics is the study of economy-wide phenomena, including , unemployment, and economic growth.

inflation

All decisions involve .

tradeoffs

Society faces an important tradeoff: vs equality.

efficiency

The opportunity cost is the cost for decision making.

relevant

The opportunity cost of going to college for a year includes foregone .

wages

Principle #3 states: Rational people think at the .

margin

When a manager considers increasing output, she compares the extra cost of the needed labor and materials to the extra .

revenue

An is something that induces a person to act.

incentive

Principle #5: Trade can make everyone better off by allowing people to in producing one good or service.

specialize

Markets are usually a good way to organize .

economic activity

The invisible hand works through the system.

price

Enforce property rights is an important role for government; they enforce rights.

property

Market failure occurs when the market fails to allocate society’s resources efficiently, due to market .

power

A positive statement is about 'what is' and is ; a normative statement is about 'what ought to be' and is inherently not .

testable; testable

Economists often distinguish between statements and normative statements.

positive

"Raising the tax on a gallon of gasoline will raise the price of gasoline."" is a statement.

positive

"The tax on a gallon of gasoline should be raised." is a statement.

normative

An increase in the price of bus rides will cause an increase in demand for taxi services.

consumer

An economic model is a representation of some aspect of the economy.

simplified

The scientific method steps are Observation → Model Building → .

Testing

An economic model describes the economic world like a road map: they focus on only what is .

important

Economists play two roles: scientists and .

policy advisors

Observation helps us to develop in the scientific method.

theory