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ECON 101 Chapter 1
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27
Economics
Undergraduate 1
09/08/2013

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Term
Economics
Definition
The study of the management of scarce resources to satisfy unlimited human wants.
Term
Five factors of production
Definition
Capital-Plant, Equip, Inventory, Residential Const. (PEIR)
Land-Natural resources
Labour-Human resources
Technology-Change in the productive process
Entrepreneurship-innovation, invention
Term
Difference between goods and services
Definition
Good-tangible commodity
Service-intangible commodity
Term
Factor of production
Definition
Resources used to produce goods and services
Term
production
Definition
Act of making goods and services
Term
Consumption
Definition
The act of using goods or services to satisfy wants
Term
Scarcity
Definition
Implication that choices must be made, which implies cost
Term
Role of economics vs. politics
Definition
Economics manages scarce factors, politics decides among desires
Term
Opportunity cost
Definition
Value of next-best alternative, subjective
Term
Production possibility curve (PPC)
Definition
Shows all possible combinations of production if all inputs are fully emplyed at normal utilization rate
Term
Resource allocation
Definition
Allocation of economy's scarce resources among alternative uses
Term
Four key economic pronelms
Definition
What is produced and how? micro
What is consumed and by whom? micro
Why are resources sometimes idle? macro
Is productive capacity growing? macro
Term
Microeconomics
Definition
Study of causes and consequences of the allocation of resources as it is affected by the workings of the price system.
Term
Macroeconomics
Definition
Study of the determination of economic aggregates such as total output, price level, employment, and growth
Term
Law of increasing marginal opportunity cost
Definition
THe OC of increases as the production of X increases.
Term
Marginal cost
Definition
Opportunity cost of producing one more unit
Term
Marginal benefit
Definition
Extra benefit from consuming one more unity
Term
Where should we be on the PPC?
Definition
Where marginal cost=marginal benefit
Term
"Four thespians in the economic tragedy
Definition
Household (Consumer)
Firm (Producer)
Government
Rest of World
Term
Market
Definition
Area over which buyers and sellers negotiate the exchange of a commodity
Term
Specialization of labour
Definition
One worker producing one product
Term
Division of labour
Definition
One product divided into individual tasks done by different workers
Term
Barter
Definition
Goods and services being directly traded
Term
Four types of economic systems
Definition
1) Traditional-allocation and distribution based on custom, effective in static environment
2) Command-Central planning authority
3) Free market-Allocation and distribution by private households and firms. Decentralized price system
4) Mixed-Allocation and distribution by private and public sectors
Term
Four types of economic systems
Definition
1) Traditional-allocation and distribution based on custom, effective in static environment
2) Command-Central planning authority
3) Free market-Allocation and distribution by private households and firms. Decentralized price system
4) Mixed-Allocation and distribution by private and public sectors
Term
Adam Smith
Definition
Stresses efficiency and allocation of resources
Term
Karl Marx
Definition
Stressed equity and distribution of income
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