Economic Praxis Study set
Terms in this set (32)
Fundamental Economic problem
Our wants and needs are nearly unlimited, but the resources available to satisfy these wants and needs are always limited.
Term used to describe the limited nature of society's resources. I.E. Water or air
the study of how people allocate their limited resources to satisfy their nearly unlimited wants.
the study of the individual units that make up the economy.
the study of the overall aspects and workings of the economy.
Five Foundations of Economics
Incentives, Trade-Offs, Opportunity cost, marginal thinking, and the principle that trade creates value.
factors that motivate you to act or exert effort.
encourage action i.e. high oil prices cause suppliers to extract more oil.
encourage action. I.E. fear of a ticket keeps people from driving too fast.
have a direct result. I.E. cut my grass and I'll pay you $30
Creates an unintended consequence. IE Stay on welfare instead of get a job.
the engine of economics
the decision to do this versus that. All decisions incur a cost.
the highest valued alternative that must be sacrificed to get something else.
a purposeful evaluation of the available opportunities to make the best decision possible.
evaluating whether the benefit of one more unit of something is greater than its cost.
bring buyers and sellers together to exchange goods and services.
the voluntary exchange of goods and services between two or more parties.
the situation in which an individual, business or country can produce at a lower opportunity cost than a competitor. Harnesses the power of specialization.
can be tested and validated (fact)
cannot be tested or validated (opinion)
the arena in which economics operates. Objectivity.
things we know about and can control.
things we can't control
Production possibilities frontier
a model that illustrates the combinations of possible societal outputs if all resources are being used efficiently.
law of increasing relative cost
the opportunity cost of producing a good rises as society produces more of it.
The goal of societies. Enables a society to produce more output in the ffuture.
Ways to make economy more productive
improving technology, adding resources, specialization, trade
the ability to produce more with the same quantity of resources than someone else
Any good that is produced for present consumption IE Food
help in the production of other valuable goods. IE Trucks or computers
using resources to create or buy new capital
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