econ recharge fundamentals
assumptions for decision making
Self-interest, marginal decision making, and optimization
diminishing marginal benefit
The benefit gained from consuming an additional unit decreases as the total number of units increases.
production possibilities curve
a graph that shows alternative ways to use an economy's productive resources -best to use point on the curve -under the curve: possible but inefficient -outside the curve: impossible
production possibilities schedule
a table that shows the possible combinations of two different goods or services that can be produced with fixed resources and technology
land describes
all natural resources used in production
labor describes
all physical and mental actions that go into production
when firms purchase resources in the circular flow model, it is a _________ to them and _________ to households
cost income
as the amount of an activity increases, its marginal benefit
decreases
______ is the study of how individuals and societies allocate scarce resources among many competing uses, and how this decision making affects the economy at large
economics
allocating resources to one project...
eliminates the chance of another
capital describes
everything created to better production
in the circular flow model, ____ must buy resources in order to produce the output they will sell to households
firms
in the circular flow model ______ purchase resources with money payments. to households this is a
firms cost
in the two sector circular flow model, _______ must buy resources from _______ in order to produce the output they will sell to households
firms, households
the circular flow models starts with __________. they offer the resource market the land, labor, capital, and entrepreneurial ability that they own.
households
what is the last step in the circular flow model
households buy the goods and services from firms (with the income they made from earlier) with monetary payments (expenditures)
how we allocate resources affects
how much we consume and what we consume (personal and social welfare)
4 categories used to produce resources
land labor capital entrepreneurial ability
the subject of economics can be divided into what 2 main categories
macro and micro
______ deals with large scale issues in the economy, such as total output, average price levels and inflation, and unemployment
macroeconomics
Optimization
making the best or most efficient use of a situation, product, or resource when marginal benefit outweighs or equals marginal cost
when someone compares marginal benefits associated with an activity to its marginal cost, that person is making a _______ decision
marginal
in exchange for firms buying resources, they get what?
materials and talents they need to produce goods and services to the product market
the value of the next best alternative
opportunity cost
the comparison of the scarcity of one good, service, or resource to that of another is called _________ _________
relative scarcity
drinkable water is ______ than water in general
relatively more scarce
although points on the production possibilities frontier represent the different combinations of output, ultimately what they show is how we allocate our scarce _______ to the production of two different goods or services
resources
expenditures made by households become what to firms
revenue
economics is the study of how individuals and societies allocate
scarce resources among many competing uses
______ means that resources are limited
scarcity
increasing marginal cost describes
the direct relationship between the marginal cost associated with the use of a good or service and the quantity produced
physical capital
the human-made objects used to create other goods and services (buildings, machinery, trucks, tools)
entrepreneurial ability
the imagination required to develop a new product or process, the skill needed to organize production, and the willingness to take the risk of profit or loss
human capital
the skills and knowledge gained by a worker through education and experience to better production
increasing marginal cost
when each additional unit costs more to produce than the previous one