All flashcards
Flashcard 1: Which economic system relies on customs and traditions?
Answer: Traditional economy. Economic decisions follow established cultural practices.
Flashcard 2: What is a renewable resource?
Answer: A resource that can be replenished naturally. Nature can restore these resources over time.
Flashcard 3: What is comparative advantage?
Answer: Ability to produce a good at a lower opportunity cost. The basis for mutually beneficial trade between parties.
Flashcard 4: What is absolute advantage?
Answer: Ability to produce more of a good with the same resources. Superior productivity in producing a specific good or service.
Flashcard 5: What is the 'invisible hand' as described by Adam Smith?
Answer: Self-regulating nature of the marketplace. Market forces coordinate individual actions without central planning.
Flashcard 6: What is the difference between microeconomics and macroeconomics?
Answer: Micro focuses on individuals; macro on whole economies. Different scales of economic analysis and decision-making.
Flashcard 7: What does the term 'utility' refer to in economics?
Answer: Satisfaction or benefit from consuming a good. Measures the happiness or value gained from consumption.
Flashcard 8: What is a command economy?
Answer: Government makes all economic decisions. Central planning replaces market forces in resource allocation.
Flashcard 9: What is a market economy?
Answer: Decisions are driven by supply and demand. Private ownership and price signals guide resource allocation.
Flashcard 10: What is a mixed economy?
Answer: Combines elements of market and planned economies. Government and markets share control over economic decisions.
Flashcard 11: Which economic system relies on customs and traditions?
Answer: Traditional economy. Economic decisions follow established cultural practices.
Flashcard 12: What is the function of the factors of production?
Answer: To produce goods and services. Resources transform into useful goods and services for society.
Flashcard 13: What is the purpose of economic models?
Answer: To analyze behavior and predict outcomes. Simplified frameworks help understand complex economic relationships.
Flashcard 14: What is the difference between positive and normative economics?
Answer: Positive is fact-based; normative is opinion-based. Positive describes what is; normative prescribes what should be.
Flashcard 15: What is meant by 'economic efficiency'?
Answer: Maximizing output from given resources. Producing the maximum possible output from given inputs.
Flashcard 16: What does 'ceteris paribus' mean in economic analysis?
Answer: All other things being equal. Assumes other variables remain constant during analysis.
Flashcard 17: What is a trade-off?
Answer: A compromise between two choices due to scarcity. Giving up one option to obtain another due to limited resources.
Flashcard 18: Which economic principle states that people face trade-offs?
Answer: Scarcity. Limited resources force choices between competing alternatives.
Flashcard 19: What is marginal analysis?
Answer: Examination of additional benefits vs. costs. Compares additional benefits to additional costs of decisions.
Flashcard 20: What is the role of incentives in economics?
Answer: Incentives motivate behavior and decision-making. Rewards and penalties guide economic choices and actions.
Flashcard 21: What is the difference between needs and wants?
Answer: Needs are essential; wants are desired extras. Needs are necessary for survival; wants improve quality of life.
Flashcard 22: Identify the term: The use of resources in such a way as to maximize the output of goods and services.
Answer: Efficiency. Getting maximum output from available resources.
Flashcard 23: Which concept is illustrated by a downward-sloping PPC?
Answer: Trade-offs and opportunity costs. The slope shows what must be given up for more of another good.
Flashcard 24: What does a production possibilities curve (PPC) illustrate?
Answer: Trade-offs and opportunity costs. Shows maximum possible production combinations given resources.
Flashcard 25: State the law of increasing opportunity costs.
Answer: As production increases, opportunity cost increases. Resources become less adaptable as production shifts.
Flashcard 26: What are economic resources?
Answer: Land, labor, capital, and entrepreneurship. The four factors of production used to create goods and services.
Flashcard 27: Why do economists use models?
Answer: To simplify reality and analyze economic issues. Models eliminate complexity to focus on key relationships.
Flashcard 28: What is the opportunity cost?
Answer: The next best alternative forgone. The value of what you give up when making a choice.
Flashcard 29: Which concept explains the need for trade-offs in economics?
Answer: Scarcity. Limited resources force choices between alternatives.
Flashcard 30: Identify the basic economic problem highlighted by scarcity.
Answer: Unlimited wants vs. limited resources. The core dilemma forcing choices in all economic systems.