Card Set Information
macro test 1
What is economics?
the study of how people use their scarce resources to satisfy their unlimited wants.
What are resources?
the inputs, or factors of production, used to produce the goods and services that people want;
labor, capital, natural resoures, and entrepreneurial ability
What is labor?
The physical and mental effort used to produce goods and services.
What is capital?
the buildings, equipment, and human skills used to produce goods and services.
What are natural resources?
all the gifts of natureused to produce goods and services;
renewable and exhaustible resources.
What is entrepreneurial ability?
The imagination required to develop a new product or process, the skill needed to organize production, and the willingness to take the risk of profit or loss.
What is an entrepreneur?
a profit-seeking decision maker who starts with an idea, organizes an enterprise to bring that idea to life, and assumes all the risk of the operation.
What are wages?
payment to resource owners for their labor.
What is interest?
payment to resource owners for the use of their capital.
What is rent?
payment to resource owners for the use of their natural resources.
What is profit?
reward for entreprenurial ability; sales revenue minus resource cost.
What is a good?
a tangible product used to satisfy the human want.
What is a service?
an activity, or intangible product, used to satisfy human wants.
What is scarcity?
when the amount people desire exceeds the amount available at a zero price.
What is a market?
a set of arrangements by which buyers and sellers carry out exchange at mutually agreeable terms.
What is a product market?
a market in which a good or service is bought or sold.
What is the circular flow-model?
a diagram that traces the flow of resources, products, income, and revenue among economic decision makers.
What is rational self-interest?
when a individual tries to maximize the expected benefit achieved with a givenb cost or to minimize the expected cost of achieving a given benefit.
What is marginal?
incremental, additional, or extra; used to describe achange in an economic variable.
What is microeconomics?
study of the economic behavior in particular markets, such as that for computers or unskilled labor.
What is macroeconomics?
study of the economic behavior of entire economies, as measured, for example, by total production and employment.
What are economic fluctuations?
rise and fall of economic activity relative to the long-term growth trend of the economy; also called business cycles.
What is the economic theory, or economic model?
simplification of reality used to make predictions about cause and effect in the real world.
What is a variable?
a measure, such as price or quantity, that can take on different values at different times.
What is the "other-things-constant" assumption?
the assumption, when focusing on the relation among key economic variables, that remain unchanged; in Latin,
What is behavioral assumption?
an assumption that describes the expected behavior of economic decision makers, what motivates them.
What is a positive economic statement?
a statement that can be proved or disproved by reference to facts.
What is a normative economic statement?
when which reflects an opinion, which cannot be proved or disapproved by reference to the facts.
What is the association-is-causation fallacy?
the incorrect belief that what is true for the individual, or part, must necessarily be true for the group, or the whole.
What are secondary effects?
unintended consequences that may develop slowly over time as people react to events.
On a graph, what is the origin?
the zero point
What is the horizontal axis?
What is the vertical axis?
What is a dependent variable?
one whose value depends on that of the independent vsriable.
What is a independent variable?
one whose value determines that of the dependent variable.
What is a postive relation(direct relation)?
one that occurs when two variables increase or decrease together; the two variables move in the same direction.
What is a negative relation(inverse relation)?
occurs when two variables move in opposite directions; when one increase, the other decreases.
What is the slope of a line?
a measure of how much the verticle variable changes for a given increase in the horizontal variable; the vertical change between two points divided by the horizontal increase.
What is a tangent?
a straight line that touches a curve at a point but does not cut or cross the curve; used to measure the slope of the curve at a point.
What is opportunity cost?
the value of the best alternative forgone when an item or activity os chosen.
What is sunk cost?
cost that has already been incurred, cannot be recovered, and thus is irrelevant for present and future economic decisions.
What is the law of compatitive advantage?
the individual, firm, region, or country with the lowest opportunity cost of producing a particular good should specialize in that good.
What is absolute advantage?
th ability to make somethingusing fewer resources than the other producers use.
What is comparitive advantage?
ability to make something at a lower cost than other producers face.
What does it mean to barter?
the direct exchange of one good for another without using money.
What is division of labor?
breaking down the production of a good into seperate tasks.
What is specialization of labor?
focusing work effort on a particular product or a single task.
What is the production possibilities frontier(ppf)?
a curve showing alternative combinations of goods that can be produced when available resources are used efficiently; a boundry line between inefficent and unattainable combinations.
What is efficiency?
condition that exists when there is no way resources can be reallocated to increase production of one good without decreasing production of another; getting the most from available resources.
What is the law of increasing opportunity cost?
to produce more of one good, a successively larger amount of the other good must be sacrificed.
What is economic growth?
an increase in the economy's ability to produce goods and services; reflected by an outward shift of the economies production possibilities frontier.
What are the rules of the game?
formal and informal institutuions that support the economy-laws, customs, manners, conventions, and other institutional underpinnings that encourage people to pursue productive activity.
What is the economic system?
set of mechanisms ans institutions that resolve the what, how, and for whom questions.
What is pure capitalism?
an economic system characterized by the private ownership of resources and the use of prices to cordinate economic activity in unregulated markets.
What are private property rights?
an owner's right to use, rent, or sell resources or property.
What is pure command system?
an economic system characterized by the public ownership of resources and centralized planning.
What is a mixed system?
an economic system characterized by the private ownership of some resources and the public ownership of other resources; some markets are regulated by the government.
What is utility?
satisfaction received from consumption; sense of well being.
What are transfer payments?
cash or in-kind benefits given to individuals as outright grants from the governement.
What was the Industrial Revolution?
development of large-scale factory production that began in Great Britain around 1750 and spread to the rest of Europe, North America, and Australia.