All Flashcards
What is scarcity?
Unlimited wants but limited resources.
Define opportunity cost.
The value of the next best alternative foregone.
What is a Production Possibilities Curve (PPC)?
A graph showing maximum combinations of goods/services an economy can produce.
What is comparative advantage?
Ability to produce a good at a lower opportunity cost than competitors.
Define Demand.
The quantity of a good consumers are willing to buy.
What is Supply?
The quantity of a good producers are willing to offer.
Define Equilibrium.
The point where quantity supplied equals quantity demanded.
What is economics?
The study of how we allocate limited resources to satisfy unlimited wants and needs.
What is laissez-faire?
A system where markets allocate resources perfectly without intervention.
What are markets?
Places (physical or virtual) where buyers and sellers interact to exchange goods or services.
How does scarcity apply to deciding what to eat for lunch?
Limited money and time mean choosing one lunch option means giving up others; opportunity cost is the next best meal.
How does opportunity cost apply to attending college?
The opportunity cost includes tuition, fees, and forgone wages from not working full-time.
How does comparative advantage apply to international trade?
Countries specialize in producing goods where they have a lower opportunity cost and trade with others, increasing overall consumption.
How does marginal analysis apply to deciding how much to study?
Continue studying as long as the marginal benefit (improved grade) exceeds the marginal cost (time spent, fatigue).
How does marginal utility apply to eating pizza?
Each slice provides less satisfaction than the previous one; stop eating when the marginal utility is less than the marginal cost (feeling full).
How does scarcity affect a government's budget decisions?
Limited tax revenue forces governments to prioritize spending on programs like education, healthcare, or defense, each with an opportunity cost.
How does opportunity cost relate to starting a business?
Besides financial investment, the opportunity cost includes the salary forgone from not pursuing alternative employment.
How does comparative advantage influence career choices?
Individuals often specialize in jobs where their skills have a lower opportunity cost compared to others.
How does marginal analysis affect a firm's production decisions?
Firms increase production as long as marginal revenue exceeds marginal cost, maximizing profit where MR=MC.
How does marginal utility guide consumer spending?
Consumers allocate their budget to maximize overall satisfaction, buying goods until the marginal utility per dollar is equal across all goods.
What is scarcity?
Unlimited wants exceeding limited resources, forcing choices.
What is opportunity cost?
The value of the next best alternative forgone when making a choice.
Define factors of production.
Resources used to produce goods and services: land, labor, capital, entrepreneurship.
What is a free-market economy?
An economic system where decisions are made by individuals and businesses based on supply and demand.
What is a command economy?
An economic system where the government controls the economy and makes decisions.
What is a mixed economy?
An economic system combining free-market and command elements.
What is productive efficiency?
Producing goods at the lowest possible cost (on the PPC).
What is allocative efficiency?
Producing the mix of goods society desires most (optimal point on the PPC).
Define absolute advantage.
Being able to produce more of a good with the same resources.
Define comparative advantage.
Being able to produce a good at a lower opportunity cost.
What is marginal cost (MC)?
The cost of producing one more unit of a good or service.
What is marginal benefit (MB)?
The benefit of consuming one more unit of a good or service.
Define utility.
The satisfaction or happiness derived from consuming goods and services.
Define marginal utility.
The additional satisfaction gained from consuming one more unit of a good or service.