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37 Cards in this Set
- Front
- Back
a social science dealing with the allocation of scarce resources to meet unlimited wants |
Economics |
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Land, Labor, Capital, and Entrepreneurial Ability |
Scarce Resources in the Factor of Productions |
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all natural resources |
Land |
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Human effort in the production process; none owners |
Labor |
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refers to the tools, equipment, machinery used the production process |
Capital |
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owner and owners in the business; they take risks and organizes the factors of production |
Entrepreneurial Ability |
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The idea of scarce resources and the unlimited desires of wants |
The economic problem |
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This is the most important thing you give up when making a choice; next best alternative; second choice |
Opportunity Cost |
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a simplification of reality |
Economic Model |
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a Latin phrase used to simplify life; and means "everything else remains constant' |
Ceteris Paribus |
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1. Two-Good Economy 2. All resources are efficiently utilized 3. Technology and resources are fixed |
The three assumptions of the production possibilities model |
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1.What goods and services will be produced? 2.How will the goods and services be produced? 3.Who will get the goods and services? |
The three fundamental questions Econ systems must answer |
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When you buy something, you are casting a dollar vote for that item |
Dollar Votes |
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the idea that the consumers are in charge |
Consumers sovereignty |
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a mechanism or place that brings together buyers and sellers |
Market |
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Allocates scarce resources through the interaction of buyers and sellers |
Market System |
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1. Systems of free markets and prices 2. Role of private property and property rights 3. Limited role of government 4. Role of self-interest as a motivating factor 5. Competition |
Key elements of a Market Economy |
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Contains two participants; Has a resource and product market; Also has a money flow and real flow |
Circular Flow Model |
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Provided to businesses from households (Land, Labor, Capital, and Entrepreneurial Ability) |
Resources/Factors of Production |
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each factor receives a factor payment to lure resources from alternative uses (Rent, Wages, Interest, and Normal Profit) |
Factor Payments |
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the minimum amount it takes to keep the entrepreneur in business for his/herself; this is also the cost of production |
Normal Profit |
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this is the Total Revenue minus Total Costs |
Pure Economic Profit |
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Price x Quantity |
Total Revenue |
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all the costs of production including normal profit |
Total Costs |
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The Factor Payments and Consumers Expenditures |
Money Flow |
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Factors of Production and Goods and Services |
Real Flow |
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Factors of Production and Factor Payments (H.C are the suppliers and Businesses are the demanders) |
Resource Market |
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Consumers Expenditures and Goods and Services (Businesses are the suppliers and H.C are the demanders) |
Product Market |
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is the study of economics by looking at the entire economy |
Macroeconomics |
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uses economics to study and look at the individual units-one price, firm, or industry output |
Microeconomics |
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makes the decision about what and how to produce as well as who gets the stuff through interaction of buyers and sellers |
Market Economy |
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the schedule that shows that quantities of a good consumers are willing and able to buy at various prices out of a set of all possible prices, over a specified period of time. |
Demand Schedule |
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there will always be an inverse(indirect) or negative relationship between price and quantity demanded |
Law of Demand |
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What happens to QD as price goes down? |
QD increases |
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What happens to QD as price goes up? |
QD decreases |
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this reflects a movement along a demand curve as the price changes (ceteris paribus) |
Change in Quantity Demanded |
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a right or left shift in demand moving the entire curve (more or less is demanded at all possible prices) |
A Change in Demand |