Basic Concepts
The study of how people and societies use limited resources to satisfy unlimited wants.
Economics
Exists because wants are unlimited and resources are limited.
Scarcity
Decisions made by comparing the additional benefit to the additional cost.
Marginal Analysis
This advantage comes from producing more with the same resources.
absolute advantage
A point inside the PPC represents this.
Inefficient
A system where buyers and sellers make decisions with little government involvement.
Free Market Economy
The value of the next best alternative when a choice is made.
Opportunity Cost
If the marginal benefit of the third slice of pizza is $2 and the marginal cost is $3, should you eat it?
No b/c MB<MC
This advantage comes from producing a good at a lower opportunity cost.
The bowed-out (concave) shape of the PPC is due to this principle.
Increasing Opportunity Cost
Tools, machines, and buildings used to produce goods and services.
Capital
If a student can study or go to the movies on a Friday night, these options are called
Trade-Offs
A rational decision-maker keeps going until this condition is met, and then stops.
MB=MC
This occurs when individuals, businesses, or nations focus on producing a limited range of goods or services in order to increase efficiency and trade with others.
Specialization
The United States is known for having this type of economic system
Mixed
The 3 questions every society must answer.
What to produce? How to produce? Whom to produce for?
If producing 1 car costs 5 computers, then the opportunity cost of 1 computer is this.
1/5 of a car
The total benefit of mowing 3 lawns is $90. The total cost is $60. What is the net benefit?
$30
Japan takes 4 hours to make a car and 2 hours to make a computer. Korea takes 6 hours for a car and 3 for a computer. Who has absolute advantage in computers?
Japan - less time
This economic term refers to the satisfaction or usefulness a person receives from consuming a good or service.
Utility
Known as the "Father of Economics," he introduced the idea of the invisible hand, explaining how self-interested individuals in a free market can lead to positive social outcomes.
Adam Smith
The slope of a PPC represents this.
the rate of opportunity cost
The reason why an economist would not be happy with MB>MC...
left over energy or resources to produce more
Country A can produce 10 wheat or 20 cotton. Country B can produce 5 wheat or 15 cotton. Who has the comparative advantage in wheat?
Country A
Public ownership exists in this type of economic system
Command Economy