ECON 2306: Chapter 1 and 2
32 Cards in this Set
| Front | Back |
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Economics
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economics is the study of the allocation of limited resources to unlimited human wants
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scarcity & choice
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opportunity cost is the next best alternative
scarcity forces choices
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Rational Behavior
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How you can best achieve your goal using the least amount of effort/resources.
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Marginalism
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the process of analyzing the additional costs or benefits arising from a decision
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why study economics?
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1) makes you a better citizen
2) you can make money
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Macro
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agrogance, unemployment, inflation
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micro
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indiv. products
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positive statement
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hypotheticallytestable
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normative statement
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is not testable (opinion)
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full employment
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use all of society's resources within societally acceptable standards
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full production
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using all your resources
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prod. efficiency-
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least cost
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allocative efficiency
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things people want
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Command System
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Allocation of resources is heavily controlled by government instead of free market forces. (North Korea)
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Market System
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Capitalism. Private ownership of resources and use of markets and prices to coordinate/direct economic activity.
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traditional system
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economic system in which elders make decisions
power through family
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Characteristicsof a market system
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1)private property2)freedom of net. and choice
3) self interest
4) competition of interests
5) market and market prices
6) reliance on capt and tech
7) specialitzation
8) division of labor
9) geographic speculation
10)money
11) active but limited gov.
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private property
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ability to own things; three rights: right to use, right to trade, right to deny
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freedom of nt. and choice
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ability to use the resources as you see fit
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self interest
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do what you want with your money
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competition of interests
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monopoly isn't competition of interest; keeps prices low
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markets and prices
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competetion of interests; keeps prices pushed low
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reliance on capt and technology
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b/c there is competition, firms are going to try to innovate new technologies to keep prices low
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specialization
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one particular labor (what you do best)
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division of labor
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dividing up tasks into smaller tasks; increasing production
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geographic specialization
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reasons why things are produced in the areas they are
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money
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its a medium of exchange; eliminates the double coincidence
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active but limited gov
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nothing small, a min. amount it HAS to do; has to enforce property rights & has to enforce contracts
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what to produce?
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a profitable outcome; market restraints what to produce; PROFIT DETERMINES WHAT TO PRODUCE
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how to produce
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least cost; have productive efficiency
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who gets what is produced
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who is willing to pay
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how to accommodate change
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profits and pricing change peoples motive
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ECON 2306:Final