econ ch1-4

absolute advantage

least amount of time; who can make more of the good

comparative advantage

lowest OC

Production Possibility Curve

max amount that can be produced

One thing that distinguishes normative economic principles from positive economic principles is that

normative principles tell us how people should behave, and positive principles tell us how people will behave.

positive economics

predicts how people will behave

substitute good

price increase, demand for sub increases (proportional)

complimentary good

price increase, demand of comp decreases (inverse)

Microeconomics differs from macroeconomics in that microeconomics focuses on

the choices made by individuals and the implications of those choices.

Alex received a four-year scholarship to State U that covered tuition and fees, room and board, and books and supplies. If Alex becomes a full-time student, then

the opportunity cost of attending State U includes the money Alex could have earned working for four years.

Vinny can produce either 20 fish OR 10 coconuts in a day. Diana can produce either 30 fish or 6 coconuts per day. Assume that both Vinny's and Diana's PPF are linear.Who has the comparative advantage in the production of coconuts?

vinny

Whether studying the output of the U.S. economy or how many classes a student will take, a unifying concept is that

wants are unlimited and resources are scarce, so trade-offs have to be made.

Kendall is thinking about going to the movies tonight. A movie ticket costs $15, and she'll have to cancel a $20 dog-sitting job that she would have been willing to do for free. Kendall's opportunity cost of going to the movies is

$35

slope

OC of good on h. axis

1/slop

OC of good on v. axis

Refer to the accompanying table. Based on their comparative advantage, Kate should specialize in making _______ while Julia should specialize in making _______. Time to make a pie: Kate-50min, Julia-60min Time to make a cake: Kate- 60min, Julia-80min

cakes,pies

normative economics

how people should behave

inferior good

income increases, demand decreases (inverse)

normal good

income increases, demand increases (proportional)