Ch. 1
The Study of Decision Making
What is Economics?
Land, labor, captial, and entrepreneurship
What are the factors of production?
Economic decisions are made by individuals
What is a market economy?
where the buyer and the seller both had to give something up
What is voluntary exchange?
Weighing good and bad(Pros and Cons)
What is cost-benefit analysis?
A resource that is widely available with no danger of being used up.
What are perpetual resources?
The tools, equipment, and buildings that are used to produce goods and services
What is capital resources?
What to produce, how, and for whom to produce
What are the 3 fundamental economic questions?
We rely on others on us, on provide the goods and services that we consume.
Producing on the line of a PPF
What is producing at efficiency?
Unlimited wants and limited resources
What is scarcity?
Thinking about one more or one less
What is thinking at a margin?
a visual economic model that shows how money, goods, services, and resources move in an endless loop between households and firms
What is the circular flow of economics?
This allows individuals, businesses, and countries to specialize in what they do best and exchange surplus goods for a wider variety of items at a lower cost
What is trade makes people better off?
The goal is economic freedom and efficiency
What is market economy?
the NEXT BEST alternative you give up
What is opportunity cost?
Supply the energy, drive, and enthusiasm needed to turn ideas into realities
What is entrepreneurship?
The most common type of economy in the world today
What is mixed economy?
makes workers faster and more productive.
an economic metaphor introduced by Adam Smith that explains how people pursuing their own personal self-interest can unintentionally benefit the entire society
What is the Invisible Hand?
Physical products vs work performed for others
What are goods and services?
Shows the maximum combinations of two goods that can be produced
What is the Production Possibility Frontier (PPF)?
What are the 6 economic goals?
Freedom, equity, growth, stability, security, and efficiency
Producing something at a LOWER opportunity cost
What is comparative advantage?
Timmy makes 5 books and 8 drawings.
Lily makes 10 books and 4 drawings.
Lily has ____ _____ for books.
What is absolute advantage?