Econ ch. 1-2

What things would make it possible to push the frontier outwards on a Production Possibilities Model?

1). Discovery/availability of new or more resources 2). New/better tecnology to allow efficency 3). Better quality of resources(ex. better trained workers)

In the video "Eusebio's dream" what was the issue Eusebio faced?

A man from Peru and bc of the laws there, majority of ppl had little to no property rights. At one point the govt. took over their land and said to stay you must work for us.

What is a Social safety net?

A second source of economic security and its any form of govt. Assistance to those with financial needs.

Examples of command economies?

Communism and socialism

Goals emphasized in a command economy?

Equity, stability, and security

Give a specific company from the Freedom Sound video that suffered years ago and why?

Estonia Piano company was one of the many companies that nearly failed when the Soviets took over. The soviets dictated how many pianos this company could make and also only let them get their resources to make their pianos from Soviets (command economy). Then Estonia gained their freedom.

In the video "Eusebio's dream" what was important for Eusebio to get in order to have property rights?

First you must have an order to tell you who owns the land. Eusebio finally got a title which was important bc it prooved he owned the land. Also, to perticipate in capital ownership you have to have assests and to get assets you have to have proof of ownership of land. Then once he had his ownership of land he could get his kids an education, make fixes on his home, etc. The title he got was very important

Goals emphasized in a Market economy?

Freedom, efficiency, Growth, and stability(but its not guarenteed)

Fill in the blank: In a Factor/Resource Market, Businesses give ______ to Households?

Income: rent, wages, interest, and profit

What kind of economy does Estonia have and why (Freedom Sound video)?

Market economy bc the ppl want to improve their quality of life.

What is land in terms of economics?

Natural resources. "Gifts of nature". Things that haven't been labored yet. Ex. water

Physical capital vs. human capital?

Physical capital is items like factories, machines, tools, computers, software, etc. Human capital is the skills and knowledge of workers.

Positive vs. Normative approach to economics?

Positive: factual statements that you can prove or disprove. Normative: includes value of judgement. you bring your opinion into something. Ex. saying this "should", "ought to", "the best/worst".

What is the idea behind voluntary exchange?

Producer looks to consumer and says you have something I want (money) and consumer looks to producer and says you have something I want (product) and they each get what they want.

What are the two types of markets?

Product Market and Factor/Resource Market.

When reading a Production Possibilities Model, what does any point below the frontier show?

Production that is attainable but it is not efficent because the economy is not using all of its resources/tecnology. This would mean some ppl are currently unemployed.

What is labor in terms of economics?

Quanity and Quality of workers

When reading a Production Possibilities Model, what does any point on the frontier show?

The economy using its maximum resources and tecnology,

What is entrepreneurship in terms of economics?

The risk taking to start a business (they bring together all the resources; land, labor, and capital)

What does TANSTAAFL stand for?

There ain't no such thing as a free lunch

What does scarcity mean in terms of economics?

Theres not enough of something that we would like to have. Ex. time, food, clothes, money, oil, etc.

How was this company differnt after the Soviets left? (Freedom Sound video)

This Estonia company now had the opportunities to buy and import the best materials from all around the world to make their pianos (market economy). So free trade allowed not only this company but all of Estonia to economically prosper.

What is capital in terms of economics?

This is NOT referring to money. This is physical items needed to produce goods. This is anything long lasting that is created by humans for use in production.

What are the 3 basic economic questions? What determines how these questions are answered.

What to produce? How to produce? For whom to produce? The value of the society determines how these questions are answered.

What is a Market economy?

Where key decisions are made by business owners and consumers. Operated under a capitalist system. There is economic Freedom, Free enterprise, incentives, equal opportunity, efficient, and ppl have property rights

Definition of Economics

a social science where it deals with how best to allocate scarce resouces to satisfy economic wants. (the study of choice under conditions of scarcity).

Definition of economy?

a system for coordinating the production and distribution of goods and services

What is the definition of services?

activities produced in an economy

What is a Economic system?

addressing what, how, and for whom to produce

What is a command economy?

central planners(aka the Govt.) make the important decisions about how to answer the 3 economic questions. With command economy the Govt. intervenes, they have equality of outcome(ppl are equal), and economic security/stability

What is a socialist economy?

citizen groups known as general assemblies, along w/ counsel of workers and consumers, are the primary economic decision makers

What is the invisible hand concept?

created by Adam Smith and has to do with the buyer and seller both looking out for their best interest. Ex. If a Baker notices that buyers want bread, they will make bread so they can make an income. As the demand for the product goes up, they can up their price on the bread. Idea that buyers are free to buy what they see best suits their interest

What is a Traditional economy?

decisions abt resources are made by habit, custom, superstition, or religious tradition. In this economy they answer the 3 basic economic questions with "we do it the way we have always done it"

What does allocated mean?

distribution of resources

What does equality of outcome mean?

each member of society should share equally what the economy produces

Fill in the blank: In a Product Market, Businesses provide_____ to households. ?

goods and services

How can an economy be efficent?

if it can take every opportunity to make some people better off without making anyone worse off.

What is Microeconomics?

it deals with individual parts of the economy. Ex. 1 business firm, 1 industry, households, etc.

What are the 4 resources that are scarce?

land, labor, capital, and entrepreneurship

What is a communist govt?

legislators from a single political party establish wages, oversee production, and allocate goods according to what they believe to be the needs for their citizens.

What is Standard of living?

measure of the wealth of goods and services available to help people in the country live comfortably. Without economic growth the standard of living would not be as good.

What is the definition of needs in terms of economics?

minimal amounts of food, water, and shelter necessary for survival.

How many goods does a Production Possibilities Model use?

only 2

Fill in the blank: In a Product Market, Households_____ to businesses. ?

pay money for goods and services

Definition of Goods?

physical items produced in our economy

What is a fundemental part of a capital system?

property rights

WHat is a Factor/Resource Market?

resources(land, labor, capital, and entrepreneurship) are exchanged for income

What does the Production Possibilities Model show?

scarcity and opportunity cost. It also shows the maximum an economy can produce assuming there is full employment of resources is available. Shows how resources are efficently being used. Resources and tecnology are fixed in these models.

Fill in the blank: In a Factor/Resource Market, Households ______ to Businesses?

sell resources: land, labor, capital, and entrepreneurship

What is capitalism?

system where most resources and businesses are privately owned.

What does economic freedom give people?

the ability to make decisions for themselves

Definition of resources?

the basic elements from which all goods and services are produced.

What is Macroeconomics?

the economy as a whole. Ex. inflation, unemployment rate (of all workers), all production, etc.

What is inputs in terms of economics?

the four types of resources, along with anything created from these resources that is then used to make something else (for example, cement, steel, lumber, and plastic).

What is equity?

the quality of being fair and just

What is opportunity cost?

the value of the next best alternative given up when that choice is made. the opportunity cost of a choice is whatever you must give up for the choice

Definition of wants?

things we desire that are not essential.

What do choices always involve?

trade offs

What is a tradeoff?

when you give up something to have something else

What is a product market?

where goods and services are exchanged for $$