Economics 50 terms by ollie_mcdade

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1 Economics 50 terms by ollie_mcdade scarcity Scarcity is the fundamental economic problem of having seemingly unlimited human wants in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs. What Is Economics? "Economics is the study of how individuals and groups make decisions with limited resources as to best satisfy their wants, needs, and desires." What is Microeconomics? microeconomics deals with economic decisions made at a low or micro level. What is Macroeconomics? The study of macroeconomics deals with the sum total of the decisions made by individuals in a society or nation such as "how does a change in interest rates influence national savings? Self-interest Self-interest is when individuals make decisions that are in their own best interest. Like when you decide to get up in the morning to go to work and make money, or when you pay the grocery store for food that you would like to eat flash cards/ 1/8

2 Social interest is when choices are made that benefit society as a whole. Imagine one person, who is all knowing and really cares about the people. Every action this benevolent dictator made would be in the social interest of the society. The cool thing about social interest is that it can also be attained by individual decision makers acting in their own self-interest. This process is what Adam smith called the invisible hand. Adam Smith is often touted as the world's first freemarket capitalist. While that designation is probably a bit overstated, Smith's place in history as the father of modern economics and a major proponent of laissez-faire economic policies is quite secure. Read on to learn about how this Scottish philosopher argued against mercantilism to become the father of modern free trade. Globalization When people and organizations around the world begin to connect through business, economics, and social issues flash cards/ 2/8

3 information revolution (sometimes called also the "informational revolution") describes current economic, social and technological trends beyond the Industrial Revolution. Many competing terms have been proposed that focus on different aspects of this societal development. The British polymath crystallographer J. D. Bernal introduced the term "scientific and technical revolution" in his 1939 book The Social Function of Science to describe the new role that science and technology are coming to play within society Climate change is a change in the statistical distribution of weather patterns when that change lasts for an extended period of time (i.e., decades to millions of years). Climate change may refer to a change in average weather conditions, or in the time variation of weather around longer-term average conditions (i.e., more or fewer extreme weather events). Climate change is caused by factors such as biotic processes, variations in solar radiation received by Earth, plate tectonics, and volcanic eruptions. negative balance is a government budget deficit and debt Monopoly When only one company has control of the market The 5 Economic Needs scarcity-forces-tradeoffs principle marginal benefit Food, Shelter, Clothes, Warmth, and Water limited resources force people to make choices and face tradeoffs when they choose. what you gain by adding one more unit flash cards/ 3/8

4 economic model a simplified representation of reality that allows economists to focus on the effects of one change at a time tradeoff the exchange of one benefit or advantage for another that is thought to be better. invisible hand Adam Smith's metaphor to explain how an individual's pursuit of economic selfinterest can promote the well-being of society as a whole incentive benefit offered to encourage people to act in a certain way opportunity cost the value of something that is given up by choosing one alternative over another The Seven Principles Economic ways of thinking including scarcity, tradeoffs, cost/benefits, and thinking at the margin A Latin phrase that means while certain variables change, "all other things remain unchanged." Ceteris paribus flash cards/ 4/8

5 What is considered a positive relationship? Two variables have a positive relationship when an increase in the value of one variable is associated with an increase in the value of another variable It is illustrated by a curve that slopes upward The supply curve is an example of a positive relationship (positive relationship between price and quantity. As the price increases the quantity available increases) variables have a linear relationship type of relationship do the variables have if the curve is a straight line? variables have a non-linear relationship relationship do the variables have if the curve is not a straight line Economic System The method used by a society to produce and distribute goods and services. Patriotism The love of one's country; the passion that inspires a person to serve his or her country. flash cards/ 5/8

6 Market Economy An economic system where decisions about production, price and other economic factors are all determined by the law of supply and demand. Incentive An expectation or reward that encourages people to behave in a certain way. Scarcity when there is not enough of something to satisfy how much everyone wants of it. Trade-offs the alternative choices people face in making an economic decision Opportunity Cost the cost of the next best alternative among a person's choices-the time, money, or resources that are given up or sacrificed to make the final choice Three Economic Questions What goods and services should be produced? How these goods and services should be produced? For whom should these goods and services be produced? law of supply states that when prices decrease, quantity supplied decreases, and when prices increase, quantity supplied increases (when the price goes down so does the amount made; when the price goes up so does the amount made) flash cards/ 6/8

7 entrepreneur someone who organizes a business venture and assumes the risk for it private property property owned by individuals or companies, not by the government or the people as a whole natural resources resources (actual and potential) supplied by nature capital resources The tools, equipment, and buildings that are used to produce goods and services embargo a government order imposing a trade barrier; a limit or ban on trade Factors of production Land, labor, and capital; the three groups of resources that are used to make all goods and services Macroeconomics The study of the performance of the national economy and the global economy Microeconomics The study of the choices that individuals and businesses make, the way these choices interact in markets, and the influence of governments The Invisible Hand The price mechanism, the rise and fall of prices that guides our actions in a market. flash cards/ 7/8

8 elasticity of demand for exports a measure of the responsiveness of the quantity demanded of exports when there is a change in the relative price of exports inelastic demand quantity is insensitive to a change in price total revenue Tells you what happens to total revenue when there is a change in price Cross elasticity of demand Measures the responsiveness of the quantity demanded of a product when their is a change in price of another product XED = % change in quantity demanded of Good X" % change in price of good "Y" Cross Elasticity related to? Any Product related to each other Substitutes Ecross is a positive coefficient Complement Ecross is a negative coefficient. flash cards/ 8/8