academic decathalon 2019 economics flash cards (unfinished)
Terms in this set (55)
name of Adam Smith's 1776 book on economics.
An Inquiry into the Nature and Causes of the Wealth of Nations
What is the most fundamental element of economics?
How many different items does an average supermarket carry?
What is the driving force behind the actions of the butcher, brewer, and baker?
their self interests
Economics helps us to understand what two aspects of our economy?
why our economy functions smoothly at times, and why it occasionally breaks down
the study of how individuals make choices about how to allocate resources to satisfy a want, and interactions between individuals
Though economists study a vast range of different behaviors, their work is unified by what?
a reliance on a small number of seemingly simple, yet powerful assumptions
Where does scarcity arise from?
limited resource supplies and insatiable desires
Name four major resources of an economy that are limited no matter how wealthy a society is.
work, energy, knowledge, and capital
List four expenses families must choose how much income to spend on.
food, clothing, travel, and savings
What are expenses a society must choose how much of their resources to devote to?
healthcare, national defense, and education
What is implied by scarcity?
Define a trade-off
giving up one thing to get something else
The cost of what you choose is what you have to give up; this is called the ___ of your choice.
The opportunity cost of attending a baseball game for a landscaper is
income from mowing lawns
What are the explicit costs of college?
tuition, books, room and board
What is an implicit cost of college?
What does the true cost of college not include?
the cost of room and board
What is the economic assumption that people make choices by comparing benefits vs. opportunity costs?
Give two examples of social issues many people care about.
reducing pollution and helping the less fortunate
Cost-benefit calculations are performed in what way?
intuitively and approximately
What is one reward of studying economics?
We become better decision makers.
By ___ in the things we like and do the best, and then trading with other people who have different abilities, both we and they can be better off.
What is necessary for benefits to outweigh the costs for both parties involved in trade?
What do theoretical models help us to understand?
how the economic phenomena we observe fit together
What do models capture?
the essential features while stripping away the unnecessary details
What four things does economic analysis rely on?
observation, description, measurement, and theory
In economics, what do models most often consist of?
diagrams or mathematical formulas
At first glance, models appear ___.
What is the test of an economic model?
how well it captures the aspects of reality that we are seeking to understand
The simplicity and lack of realism of models allows us to what?
identify the important assumptions and characteristics
The insights that economic offers about individual and social decisions can be divided into two categories, ___ or ___ economics.
positive and normative
Define positive economics.
economic analysis that predicts what ~will~ happen under particular circumstances
Which economic analysis focuses on cause-and-effect relationships?
What is the defining characteristic of positive economics?
It is value free.
What is an analysis method?
Define normative economics.
economic analysis that tells what ~should~ be as opposed to what is
Normative economics combines what two things?
economic analysis with value judgments
The tool of economics that can help to structure a discussion of different possible outcomes is what?
"Consumption of gas will decrease if gas prices increase" is what type of economic statement?
"Consumption of gas should decrease if gas prices increase" is what type of economic statement?
What are the four consequences of a hike in minimum wage?
increased income of minimum-wage workers, some minimum-wage workers losing jobs, workers unable to acquire minimum-wage jobs, and diminished profits for minimum wage employers
What is the social effect of an increase in minimum wage?
benefits some and hurts others
An important criterion that economists often apply in evaluating a society's use of scarce resources is what?
the efficiency of the resulting allocation
Define Pareto efficiency
There is no way to improve at least one person's well-being without reducing the well-being of someone else.
Who is the creator of the concept of Pareto efficiency?
Tell whether the following is Pareto efficient: In a ten-person economy where $100 worth of goods and services are produced, each citizen receives $11 and one citizen receives $1.
Tell whether the following is Pareto efficient: In a ten-person economy where $100 worth of goods and services are produced, each citizen receives $9.
Not Pareto efficient
Tell whether the following is Pareto efficient: In a ten-person economy where $100 of goods and services are produced, one citizen receives $100.
When we make decisions about how to allocate resources, we must do so in a way that does not
Does Pareto efficiency provide a basis for
choosing between efficient outcomes?
What does choosing between efficient outcomes require?
Normative judgements rest on criteria outside the realm of
Efficiency is an important first step in maximizing what?
We must allocate resources in such a way as to avoid what?