Microeconomics chapter 1 vocabulary

Scarcity

A situation in which unlimited wants exceed the limited resources available to fulfill those wants

allocative efficiency

A state of the economy in which production is in accordance with consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it

In a mixed economy, most economic decisions are made by the what?

They are made in market, but the government plays a significant role in the allocation of resources

What was the force you to ask the fundamental questions?

Trade-off force

The three fundamental questions any economy must answer

What goods and services will be produced?, How will the goods and services be produced?, And who will receive the goods and services produced?

What is an example of trade-off?

When you choose to spend the night partying instead of doing homework, you are on one hand gaining social status but on the other losing time you could use to study

opportunity cost

Highest valued alternative that must be given up to engage in the activity.

Who receives the goods and services produce depends on_

How income is distributed, the higher, your income, the more goods and services you can buy.

Why are many products made overseas?

In a market system, firm response to the economic incentives, .it is cheaper to make over there

Examples of market

Local gas station, NYSE, Craiglist, eBay.

Which economy is more efficient, essential economy or a market economy?

Market economy

Microeconomics and Macroeconomics

Microeconomics and macroeconomics are two different perspectives on the economy. The microeconomic perspective focuses on parts of the economy: individuals, firms, and industries. The macroeconomic perspective looks at the economy as a whole, focusing on goals like growth in the standard of living, unemployment, and inflation. Macroeconomics has two types of policies for pursuing these goals: monetary policy and fiscal policy.

mixed economy

An economy in which private enterprise exists in combination with a considerable amount of government regulation and promotion.

example of mixed economy

China

What are three factors that will play in the house society decides whether to produce more economic textbooks or more smart phones?

Consumers, firms, government

How old is Donald Trump planning to increase factory employment in the United States?

Do you want to impose tariffs on foreign goods?

What does firm respond to?

Economic incentive and the changes in consumers taste

In a market system, what determines how goods and services will be produced?

Firms determine how goods and services will be produced.

Positive Analysis vs. Normative Analysis

PA- about facts(what is) NA- a matter of values and opinions(what ought to be)

Where are the two types of efficiency?

Productive efficiency, and allocative efficiency

Economic models are

Simplified versions of reality designed to analyze "what is" to explain human decision making in any context.

How can Government policies can change the economic incentive the people face?

Taxing cigarettes will cause some people to reduce or quit smoking.

Rational individuals Weill weigh_

The benefit and cost of each action so that they can make the best choice

market economy

The decisions of households and firms as they interact in a market, determines the allocation of economic resources

Who made the decision, society, or the individuals?

The individuals

Equity

a condition in which people receive from a relationship in proportion to what they give to it

market

a group of buyers and sellers of a particular good or service

productive efficiency

a situation in which a good or service is produced at the lowest possible cost

voluntary exchange

a situation that occurs in markets when both the buyer and the seller of a product are made better off by the transaction

Tariff

a tax on imported goods usually reserved for regulating trade with foreign countries

marginal

additional

centrally planned economy

an economy in which the government decides how economic resources will be allocated

marginal analysis

analysis that involves comparing marginal benefits and marginal costs

Firms

buy/hire factors of production, use them to produce goods and services; sell goods and services

What is the difference between centrally planned economy and market economy?

centrally planned- government decides how resources are allocated market- decisions of houses and firms interacting in a market that allocates resources

optimal decision

continue any activity up to the point where the marginal benefit equals the marginal cost MB=MC

Microeconomics is the study of

how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices

There is often a trade-off between

efficiency and equity

What are three important, economic ideas?

people are rational, people respond to economic incentives, optimal decisions are made at the margin

Trade-off

producing more of one good or service means producing less of another good or service

economic variable

something measurable that can have different values, such as the incomes of doctors

Macroeconomics is the study of

the economy as a whole, including topics such as inflation, unemployment, and economic growth

Economics

the study of how society manages its scarce resources