Who is considered the founding father of economics and authored the book "The Wealth of Nations" in 1776?
The 4 different general viewpoints of how markets behave
The fundamental reality of economics that makes humankind decide what wants and needs to satisfy and which ones go unfulfilled
Scarcity and Economic choice
When increased production of one good incurs a cost in the form of reduced production of another good.
Trade-off or Opportunity Cost
What three models help understand the effects of trade-offs?
1. Production Possibilities Frontier Curve (PPF)
2. Law of Diminishing Marginal Returns
3. Law of Increasing Opportunity Cost
Production Possibilities Frontier Curve (PPF)
When one product is sacrificed to produce more of a different product what is the term to describe the cost incurred?
Type of economics in which hypotheses are formed to determine cause and effect relationships that lead to generalized principles or laws that predict outcomes for economic actions.
Economic methodology that means "all other things being equal." It eliminates the impact that changes in other variables might have on a study topic.
Economic methodology fallacy that assumes what applies in one instance applies all the time.
Fallacy of Composition
Economic methodology fallacy that assumes since one event follows another the former is the cause.
"Post Hoc" Fallacy
An economic methodology major analytical tool that determines the impact of one more or one less variable on an economic outcome. Ex: how much hiring a new worker increases production
Law that states that production will increase along with increased inputs, but at a point, continuing to increase inputs will decrease the total output of production.
Law of Diminishing Marginal Returns
Law that states when productivity diminishes, the cost of production increases.
Law of Increasing Opportunity Costs
Raw materials, labor, capital, and entrepreneurship are all examples of what?
Determinants of Supply
In a free market system our income limits our ability to satisfy out desires. What is this called?
Rationing Power of Prices
Law that states an inverse relationship between price and quantity demanded. Ex price of a good goes up and qty demanded goes down.
Law of Demand
Law that states that the inverse relationship between quantity and satisfaction. Ex as consumers have higher qty of a product their satisfaction level is lower.
Law of Diminishing Marginal Utility
What can cause a change in demand at any time?
This group of factors cause changes in demand and are referred to as what?
-Tastes and Preferences
-Price/Availability of substitute and complementary goods
-Future price/qty expectations
Determinants of Demand
Price and qty at which the market clears, the price stabilizes and the product is available.
When considering Consumer and Producer surplus as it relates to supply and demand where is the maximum total surplus represented?
Production of all goods and services require what 4 resource inputs?
1. Land - raw materials
2. Capital - means of produciton
3. Labor - human resources (manual/intellectual)
The 4 main economic systems are?
1. Free Market - consumers producers are unregulated
2. Traditional - society doesn't change methods of production/consumption