Econ Ch 1-4

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scarpenter14
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170702
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Econ Ch 1-4
Updated:
2012-09-13 14:56:44
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economics terms
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  1. if the rules (laws) are clear and stable (predictable), then individuals can make economic adjustments
    rules of the game
  2. efficiently allocate  scarce resources by comparing expected benefits to expected costs
    economize
  3. the study of how individuals allocate scarce resources among unlimited wants and desires within a set of rules
    Economics
  4. goods for which we are willing to sacrifice something to get, makes economizing necessary
    Scarce goods, scarcity
  5. what we must give up in order to have a good.  Not everyone will have the same ___.  The cost of obtaining anything is the value placed on whatever must be sacrificed in order to obtain it.
    Opportunity Cost
  6. what ever people value, e.g.,  money, time
    wealth
  7. Price is a means of allocating scarce goods.
    (Lottery, first-come-first-served, equally, merit, might-is-right)
    Rationing
  8. "Wealth of Nations" (in 1776), “invisible hand” works without government planning, he observed the free market
    Adam Smith
  9. “Principles of Political Economy and Taxation” (in 1817). Law of comparative advantage and argued that free trade benefited all.  
    David Ricardo
  10. making available more scarce resouces that consumers desire, an alternative to production, trade-offs
    exchange
  11. is determined by the opportunity cost, opens the possibility of trade, whoever gives up less in an exchange has the...
    Comparative Advantage
  12. “Communist Manifesto” (in 1848)  Also observed that
    specialization of labor leads to capitalism and trade, but thought that the flaws in society would ultimately cause that system to collapse.
    Karl Marx
  13. 4 Men identified with the _____ school of thought suggesting (late 1880’s to early 1900’s) economics is the study of the intentional human actions (less about math) of individuals, believed the market should pull away from gov't regulation, human action not numbers.
    • The Austrian School of Economics
    • •Carl Menger
    • •Eugen Von Bohm-Bawerk,
    • •Ludwig von Mises
    • •Friedrich Hayek
  14. whoever can produce more in a given period has the...
    absolute advantage
  15. an increase in wealth, the benefit outweighs the cost
    net benefit
  16. additional benefits outweigh additional cost
    economic efficiency
  17. illustration of the maximum combination of producation using a given set of resources and talent
    Production Possabilities Fronteir (PPF)
  18. occurs when a producer believes they have a comparative advantage on a product, only producing that one
    specialization
  19. the cost of finding the buyer/seller to trade with
    transaction cost
  20. the knowledge necessary to actively and wisely engage in the trade
    information cost
  21. these help reduce transaction and information costs
    middlemen or brokers
  22. the amount that buyers are willing and able to purchase at a given price
    Quantity Demanded
  23. the inverse relationship between price and the quantity  demanded at each price, everything else equal.
    Demand
  24. a measure of the responsiveness of demand or supply
    elasicity
  25. the responsiveness to changes in price
    price elasticity
  26. the amount that sellers are willing and able to sell at a given price
    Quantity Supplied
  27. the direct relationship between price and the quantity supplied at each price, everything else equal.
    Supply
  28. past expenses that are not relevent, do not matter to our current decision making
    sunk cost
  29. costs that vary with level of production (ex. produce more, higher cost)
    variable cost

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