Vocab 6
the study of how humans make decisions in the face of scarcity
economics
a term used when a country can overall produce more of a good (opportiny cost is not taken into account)
absolute advantage
tradeoff diagrams
shows an individual budget constraint and a production possibilities frontier for two goods, Good 1 and Good 2.
(ie. Budget Constraint & PPF)
costs that were incurred in the past and cannot be recovered
sunk costs
the worth or satisfaction of an item/good
utility
focuses on the actions of individual agents within the economy
microeconomics
focuses on the economy as a whole
macroeconomics
what point(s) on the PPF model are productively inefficient
any point below the line (because it is possible to have more of one product, the other product, or both)
the benefits and costs of choosing more/less of a good or item
marginal analysis
what point(s) on the PPF model are productively efficient
all points on the curve
the private individuals or groups of individuals own and operate the means of production (resources and businesses)
Private enterprise
a term used to describe a country that can produce a good at a lower opportunity cost than another country
comparative advantage
what type of countries are most affected by globalization and why
Medium and low incomes; in order to take full advantage of division and specialization of labor
the concept that it is impossible to produce more of one good without decreasing the quantity (ie. number) of another good (BECAUSE you’ve used all of your resource efficiently)
essentially just using all resources efficiently
Productive efficiency
A model that shows all possible options of output for two goods an economy can provide/make with its resources
Production Possibilities Frontier (PPF)
what are the two possibilities each economy faces to expand consumption of all goods
(MUST NAME BOTH)
1) If a society is using its resources inefficiently → by improving efficiency & producing on the PPF
2) Resources grow over a period of years → the economy grows → PPF shifts outwards (becomes bigger) allowing society to afford more of all goods
also technology can boost productivity which pushes out PPF as well
what three themes do tradeoff diagrams show
(MUST NAME ALL 3)
1) scarcity
2) trade-offs (opportunity costs)
3) economic efficiency
how to find opportunity cost of something (A)
the number of one thing you can make ("A") divided by the number of the other thing you can make ("B")
Does the point where productive efficiency AND allocative efficiency BOTH exist or not
BOTH
what are the two ways the PPF is different from the budget constraint model
(MUST NAME BOTH)
1) budget constraint is a straight line, PPF is a curve
2) axes of the PPF lack specific numbers
Why is there a push back to globalization
Pushback against globalization due to concern of loss of jobs, loss of political sovereignty, and increased economic inequality
the property whereby the benefit from an extra unit of an input declines as the quantity of the input increases
the law of diminishing returns
utility goes down with the increase in the amount of an object (as a person receives more of a good, the additional utility from each additional unit of the good declines)
ie. The first slice of pizza is always going to be better than the 5th
law of diminishing marginal utility
why does the PPF have a curved line
since it shows how an economy spends their money which involves the law of diminishing returns (hence different slopes throughout the line which results in its curve)
what happens as you get closer to the ends of the line on a budget constraint
the money doesn't do much anymore since it is no longer a 1 to 1 tradeoff due to opportunity cost