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