Economics 1

33 flashcards · Economics · by Logan Pollack

1. Economics

   The study of how people seek to satisfy their needs and wants by making choices

2. Need

   something that is necessary for survival

3. The fundamental economic problem of having humans with unlimited wants and needs in a world of limited resources is known as scarcity.

4. Scarcity

   all goods and services we produce are limited

5. Goods

   physical objects

6. Services

   actions or activities that one person performs for another

7. A shortage occurs when producers will not, or cannot offer goods or services at the current prices

8. Capital

   any human made resource that is used to produce other goods or services

9. Physical Capital

   human made objects used to create other goods and services - also known as capital goods

10. Human Capital

    the knowledge and skills a worker gains through education and experience

11. Entrepreneur

    ambitious leaders who decide how to combine land, labor and capital resources to create new goods and services

12. Trade Off

    all the alternatives that we give up whenever we choose one course of action over another

13. Guns or Butter

    refers to the relationship between a nation's investment on defense vs social programs

14. Opportunity Cost

    the most desirable result given up as a result of making a decision

15. Thinking at the Margin

    when you decide how much more or less of something to do, results in different levels of opportunity cost

16. Production Possibility Curve

    a graph that shows alternative ways to use an economy's resources

17. Production Possibility Frontier

    the line on a production possibility graph that shows the maximum possible output

18. efficiency

    using resources in such a way as to maximize the production of goods and services

19. Underutilization

    using fewer resources that an economy is capable for using

20. Any point inside a production possibility frontier represents underutilization

21. each point on the line represents a trade off

22. A production possibility frontier represents a country's resources as if they were frozen in time, however in reality a country's resources are always changing

23. Cost

    the most desirable alternative that is given up as a result of a decision

24. The Law of Increasing Costs

    law that states as we shift factors of production from making one good or service to another, the cost of producing the second item increases

25. How are public goods paid for?

    Taxpayer money

26. Free Rider

    someone who would not chose to pay for a certain good or service, but would get the benefits anyway (They get something for free)

27. What is a public good?

    a shared good or service

28. A _______ ________is a situation in which the market on its own does not distribute resources effectively

    Market Failure

29. What does GDP stand for?

    Gross domestic product

30. What does the GDP (gross domestic product) measure?

    the total value of all goods and services produced in an economy

31. What is a business cycle

    a period of economic growth followed by a period of economic decline

32. What does the U.S. government do to prevent economic instability?

    it creates public policies

33. What does the government do to encourage innovation?

    they provide incentives in the form of grants and subsidies