econ test 1

although your wants are unlimited, the resources you want are scarce

not enough resources to satisfy people's unlimited wants

human creations (machines) used to produce goods and services

inputs that produce the goods and services people want

how people use their scarce recourse to satisfy their unlimited wants

-all human effort/work

-physical labor or mental ideas

revenue from sales minus cost of production

someone who takes a risk to earn a profit (develop a product or create a new way to produce something more efficiently)

raw materials supplied by nature

can be used indefinitely if used wisely and allowed sufficient time to recover

once used, they're used up (not renewable)

something you can feel and touch (tangible)

not physical, uses scarce resources to satisfy human want (intangible)

nothing is ever "free" because every good and service requires scarce resources (everything costs someone something)

a simplification of economic reality used to make predictions about the real world

customers maximize expected benefit given the cost, or minimize cost for benefit

someone's opinion (can't be shown to be true/false based on reference to facts)

factual statements (ability to find out if true/false by referring to facts)

cost to consumer or producer for each additional unit

revenue or enjoyment of each additional unit

focuses on your economic behavior and the economic behavior of individuals and firms

performance of the economy as a whole

decision makers will continue to acquire information as long as the marginal benefit from information exceeds marginal cost of gathering it

where buyers and sellers carry out exchange where they buy and sell things

-households

-firms

-governments

-rest of world

value of the best alternative you must pass up

cost you already paid but can never recover no matter what you do

the set of mechanisms and institutions that resolves the what, how, and for whom questions for an economy

-private firms own ALL means of production

-no gov involvement

-private groups own ALL resources

-prices generated in free and competitive markets

no gov or institution is coordinating the market

producers work to drive out competition and work with competitors to raise prices (higher prices=more profit)

public goods benefit everyone but individual firms don't want them because they can't sell them/earn a profit or keep people from use of it

costs that aren't considered when an item is produced

-when markets both expand and contract (consumers and producers feel the pain of recession)

-no safeguard because of no gov

laws when there is no gov involved (i.e. don't steal, don't murder, etc.)

economy controlled by the gov (i.e. communist russia, north korea)

-gov setting prices

-resources are allocated

-told what to produce

-no competition market

-directing production through state run industries

-prices set by central planners

-goods and services may be rationed

less freedom with decisions; might tell people where to work

-central planners choose what to grow (can lead to inefficiency)

-no incentive to make a profit (resources can be wasted)

-gov not concerned about environment

-since no one owns it, we will use it all up

since gov owns ALL resources, there is no goal for anyone seeking a profit

a little bit of central planning and competitive markets (ie the US)

competitive markets play majority role in setting prices (some gov control: health regulations, zoning, consumer regulations)

shifting from command economies to market economies (or vice versa) (ie China)

converting gov enterprises into private enterprises

economies shaped by custom or religion (i.e. caste system in india)

1. consumer

2. capital

shows possible combination of 2 types of goods that can be produced when resources are employed efficiently

-single snapshot in time

-no new innovation

-rules of game/legal system are fixed

-maximum possible output from available resources (no more than 1 type of good can be produced without reducing amount of alternative product)

-measure through comparative advantage, specialization)

with each additional increment of a good produced requires economy to give up successfully larger increments of another good

cost of producing an additional good is the same regardless of where you are along the curve

-formal and informal institutions that support the economy (laws, law enforcement, etc.)

-encourage people to be productive

ability to produce a good/service for a lower opportunity cost than a competitor

ability to produce more of a good/service than a competitor

the worker with lower opp. cost of producing a particular output should specialize in that output

allows the workers to become more efficient

a system of exchange where products are exchanged directly for other products

organizing the production process so each worker specializes in a separate task so the group can produce more

everyone that lives together under one roof (single economic decision maker)

level of satisfaction of happiness

an economic unit formed by a profit seeking entrepreneur who combines resources to produce goods and services and accepts the risk of profit and loss

cost of time and information required for exchange

a legal claim that guarantees an owner the right to use a resource or charge others for its use

protect creators of new ideas and inventions

laws to protect inventors and new devices or processes

assigns property rights to written (original) expression

property rights to unique commercial symbols and marks

-ensure that weights and measures are standardized

-agencies that protect consumers and firms: i.e. FDA and CPSA

-when they are a monopoly, they are able to charge higher prices

-businesses work to acquire smaller businesses to make more profit

-laws that work to reduce anti-competitive behavior and promote competitive markets

-ways to prevent monopolies

where one firm can serve an entire market at a lower per unit cost then 2 or more firms can

-a fed gov's use of taxing and public spending to influence the macroeconomy

-affects our interest rates (makes more expensive to take out loans)

-ie. medicare, medicaid, and national defense

-controlled in US by federal reserve

-federal reserve attempts to control the money supply to influence the macroeconomy

-rival in consumption

-exclusive: nonpayers can be excluded

-once consumed by ONE person, it can't be used by someone else

-non-rivalrous

-non-exclusive: hard to exclude non payers

-once produced they are available to all (i.e. police force, public roads)

-non-rivalrous

-exclusive

-multiple people can consume it at once (i.e. cell service, tv subscriptions)

things that appear as a result of interaction in the company

-byproducts of production or consumption that impose costs on third party (i.e. pollution)

-byproducts that benefit producers and consumers (i.e. education)

-when they are positive externalities, gov will try to increase levels of production that will be chosen privately

-rival in consumption

-non-exclusive bc difficult to regulate (i.e. natural resources like water)

-middle income when a group of incomes is ranked lowest to highest

-in a market economy, workers will have different incomes based on the job they have

programs designed to help people who lose income due to retirement, temporary unemployment, or inability to work due to injury or disability

relative poverty, abject poverty