View
- Term
- Definition
- Both Sides
Study
- All (42)
Shortcut Show
Next
Prev
Flip
Study Guide: Exam 1
Adam Smith |
Considered to be the founder of modern economics. Wrote Wealth of Nations. |
Bankruptcy |
When a firm cannot produce and sell a product efficiently. A signal to the market that this is not the most economically efficient producer. |
Behavioral Economics |
This is a field of economics that combines the study of psychology with the study of economics in order to better understand the decision making process of buyers and sellers ingaged in market transactions. |
Capital-Intensive |
This type of production process occurs whenever the producer relies heavily on machinery (capital) with less reliance on workers (labor). |
Choice |
Because of limited resources, people must make a ________ among the many things we want. |
Command Economy |
This a method of allocating scarce resources without using markets. Central planners (states) make the decisions that would be made by the unregulated negotiation of buyers and sellers in a free market system. |
Competition |
An important condition for the efficient functioning of a free market economy that stimulates companies to work harder to best each other. |
Consumption Efficiency |
Part of making sure we make the best use of our scarce resources involves making sure the goods and services produced with those resources get allocated to the consumers who place the highest value on them. (the one doctor and two patient lesson) |
Cost-Benefit Analysis |
Considering the marginal costs and marginal benefits in decision making. (Weighing pros and cons). |
Economic Efficiency |
Refers to making the absolute best use of scarce resources. Maximizing economic surplus earned by our society will help us achieve ___________ ____________ |
Economic Pie |
This s metaphor used to illustrate the total amount of wealth or economic surplus that can be produced for society though the production and consumption decisions made by buyers and sellers. |
Economic Surplus |
___________ _________ refers to the net change in someone's well-being as a result of making a decision. (Amount you would pay minus the amount you haggle price down to) |
Efficiency |
Societies that want to maximize economic surplus need to concentrate on allocating resources to where they are most useful in society. |
Equity |
Some reductions in the economic pie to more evenly distribute wealth of a society or company. |
Externalities |
A cost or benefit of your decision that is external to your private cost/benefit analysis. (Not realizing that me smoking could be hurting those around me) |
Incentives |
An encouragement to make a decision by offering the buyer more benefits for deciding to buy-in. |
Inferior Goods |
A good is considered to be this if the demand for that good falls when the person's income rises. |
Invisible Hand |
A metaphor used to describe the way the free market seems to direct resources to their best production use and goods and services to their best consumption use so that we have economic efficiency without any explicit effort on the part of any central authority. |
Jargon |
Specialized language in a field of study. |
Labor-Intensive |
This type of production process occurs whenever the producer relies heavily on workers (labor) with less reliance on machinery (capital). |
Laws |
The regular and predictable rules for how the world works. In economics we rely on these to make good choices in production and consumption. |
Monopoly |
Exists if there is only one producer of a product in a particular market. This makes the producer less concerned about being efficient in quality of products or customer service. |
Natural Experiments |
Occurs when some naturally occurring event provides the scientist a change in an important variable that allows the scientist to observe how people respond to that change. |
Needs |
Highly valued wants in economics. |
Next Best Opportunity |
What choices had to be sacrificed to make this choice. It is the biggest (most valued) opportunity cost of a certain decision. |
Normal Goods |
Considered to be a this if the demand for the good rises when the persons income rises. |
Normative Statement |
A statement that is not potentially testable or provable. Based on subjective values. Uses words like: ought, should, good, bad, fair and unfair. |
On the Margin |
Making one small stop at a time (re-evaluating after each baby step) |
Opportunity Cost |
The value of the next best opportunities sacrificed when making a decision. |
Positive Statement |
A statement that is potentially testable and provable. Usually uses words like: is, was, or will be. |
Pigovian Taxes/ Subsidies |
Is used to fix a market failure that occurs because of a negative externality. It is the amount of the externality and should be placed on the buyers if it is consumption externality or on sellers for production externality. |
Production Efficiency |
Making sure the resources available are used in the best way possible by producing the products and services that people want most in the least wasteful manner. |
Profit |
Whenever a firm earns more revenue from the production and sale of a product that it spends on producing it. |
Ration |
Cannot produce all goods and services so this must happen to scarce resources. |
Rational |
Makes decisions in a consistent manner. People are this way to make themselves as well-off as possible. |
Resource |
Inputs used to produce goods and services. |
Scarcity |
When there is not enough to satisfy everyone's desire of that item. |
Scientific Method |
Organizing the process used by scientists to better understand the world. |
Simplifying Assumptions |
To make our models as easy to use a possible by taking away all unnecessary complexities to focus just on the parts of the model that are important to help us answer our question. |
Sunk Costs |
A cost that is unchangeable by any new decision (don't cry over spilled milk) (move the fuck on) |
Utility |
This a theoretical construct used by economists to measure the well-being or happiness people get from making decisions. |
Wants |
Thought to be unlimited, anything that we feel would make us happy and would sacrifice for. |