ECON MORE LIKE PEE-CON LOL (unit 1)

Positive Economics

Economic opinions based on facts and statistics

Normative Economics

Economic opinions based on opinions and personal judgement.

Adam Smith

Father of modern economics and free market theory.

At the Margin

Decision-making on increasing or decreasing activities.

Trade-offs

Necessary decisions between competing alternatives.

Market Components

Buyers and sellers facilitating competition.

Market Efficiency

Achieved by coordinating trade effectively.

Unintended Consequences

Unexpected effects resulting from actions taken.

Economics Definition

Study of money, production, and scarcity management.

Factors of Production

Land, labor, capital used to produce goods.

Land

Natural resources utilized in production.

Labor

Physical work contributing to production processes.

Capital

Machinery and tools aiding production.

Goods and Services

Products created for consumer use.

Diminishing Marginal Utility

Decreasing satisfaction from additional consumption.

Scarcity

Unlimited wants leading to limited resources.

Standard of Living

Average well-being across different societal groups.

Cost-Benefit Principle

Weighing costs against benefits in decisions.

Goods Examples

Food, clothing, cars produced for sale.

Shortages

Result from increased demand exceeding supply.

Scarcity-Forces-Tradeoffs Principle

Limited resources necessitate difficult choices.

Maximizing Utility

Achieving highest satisfaction from consumption.

Production Possibilities Frontier (PPF)

Graph showing maximum production efficiency.

PPF Points

Inside—efficient; Outside—unattainable; On line—max efficiency.

Traditional Economy Goals

Focus on community survival and stability.

Command Economy

Least freedom; government controls economic decisions.

Mixed Economy

Combination of market and government influences.

Circular Flow Model

Illustrates money flow between households and businesses.

Factor Payment

Income for providing production factors.

Specialization

Focusing production on specific items.

Commerce Clause

Promotes competition with minimal government interference.

Comparative Advantage

Lower opportunity cost in production.

Absolute Advantage

Higher production capability than others.

Manufacturing Jobs Overseas

Cheaper production costs in foreign countries.

Traditional Economies

Found in rural, developing regions.

Markets in a circular flow model

Goods/service markets and factor markets.

Market Economy

Individuals own production factors and make decisions.

Modern Command Economy Goals

Focus on equity and security.

Economically Free Countries

Examples include Australia, Singapore, and Switzerland.

Trade Benefits

Increases wealth through comparative advantages.

Ownership of Production

Market economy where individuals own resources.

Laissez-Faire

Hands-off economic approach promoting free market.

Trade and Availability

Enhances goods/services through comparative advantages.

Basic Economic Questions

What, how, and for whom to produce?

Economic Systems Questions

Answered by tradition, government, or market.

Invisible Hand

Self-regulating nature of the free market.

Fundamental Economic Questions

What to produce, how to produce, whom to serve.