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35 Cards in this Set
- Front
- Back
Define Economics |
The study of how human beings coordinate their wants and desires, given the decision making mechanism, social customs, and political realities of society. |
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Definition of marginal costs |
The additional costs over and above costs already occurred. |
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Definition of marginal benefit |
The additional benefit above and beyond what has already occurred. |
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Define Opportunity Cost |
The benefit forgone of the next- best alternative to the activity you have chosen. |
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Define Economic Institutions |
Laws, common practices, and organizations in a society that affect tge economy. |
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Define Positive Economics |
Statement of the facts and what is reality; it is value free |
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Define Normative Economics |
Statement of what should be; it is a value judgement |
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What is the Art of Economics |
Taking positive economics to achieve the goals of normative economics |
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Define Absolute Advantage |
The ability to produce more of a good of service than others can with a given amount of resources. |
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Define Comparative Advantage |
The ability to produce a good or service at a lower opportunity cost. |
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Define Institutions |
The formal and informal rules that constrain human economic behavior. |
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What are the three types of economic systems? |
Market Economy Capitalism Socialism |
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What are the key elements of a Market Economy? |
1. Private Property 2. Political, historical, and social forces 3. Price is the main coordinatimg activity |
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Define Market Economy |
An economic system based on private property and the market in which, in principle, individuals decide how, what, and for whom to produce. |
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Define Socialism |
An economic system based on individuals goodwill towards others, not on their own self interest, and in which society determines what, how, and for whom to produce. |
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Define Capitalism |
An economic system based on the market in which the ownership of the means of production resides woth a small group of individuals called capitalists. |
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Define Market |
Buyers and sellers trade a particular good or service. |
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Assumptions/Characteristics of a Competitive Market |
1. Perfect information 2. A standardized product 3. There are no transaction costs 4. Buyers and sellers are price takers (they have no influence over the price) |
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Determinants of Demand |
1.Consumer preferences/tastes 2. Prices of related goods 3. Income 4. Expectations 5. Number of buyers 6. Time period 7. Taxes and subsidies |
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Determinants of Supply |
1. Price of related goods 2. Technology 3. Prices of inputs 4. Expectations 5. Number of sellers 6. Time period 7. Taxes and subsidies |
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Define the Classical Theory of Economics |
A free market, laissez-faire; believes business cycles are just temporary glitches and the market will self adjust. Long-term growth, supply side |
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Define the Keynesian Theory of Economics |
Believes business cycles effect underlying problems in the economy. Short-term growth, demand side |
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Gross Domestic Product formula |
Consumer Spending + Investment + Gov. Spending |
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Define Potential Output |
The highest amount of putput an economy can sustainable produce and sell using existing production procesees and resources. |
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Define Structural Stagnation |
A cyclical downturn that we do not expect to end anytime soon with major changes in the economy. |
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Define Unemployment Rate |
The percentage of people in the economy who are willing and able to work but cannot find jobs. |
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Unemployment Rate Formula |
Number unemployed ÷ labor force |
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4 Typesof Unemployment |
1. Cyclical 2. Structural 3. Frictional 4. Seasonal |
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Define Cyclical Unemployment |
Results from fluctuations in the economy. |
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Define Structural Unemployment |
Caused by the institutional structure of an economy or by an economic restructuring making some skill obsolete. |
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Define Target Rate of Unemployment |
The lowest sustainable rate of unemployment that policymakers believe it's achievable under existing conditions. |
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Define Growth |
Changes in total output over a long period of time. |
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What are the Roles of Businesses? |
Decide what, how, how much, and for whom to produce |
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What are the Roles of Households? |
Groups of individuals living together and making joint decisions |
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What are the gains from trade? |
Can lead to increased economic functions |