Economic Concepts Flashcards

Front

Explain the factors of production?

Back

The factors of production are land, labor, capital, and entrepreneurship.

Front

What is Utility and how do you calculate marginal utility?

Back

Utility is the satisfaction gained from consuming a good or service. Marginal utility is calculated by the change in total utility divided by the change in quantity consumed.

Front

What are the 3 basic economic questions?

Back

1. What to produce? 2. How to produce? 3. For whom to produce?

Front

How do the 4 different economic systems answer the 3 basic economic questions?

Back

1. Traditional economy: based on customs. 2. Command economy: government makes decisions. 3. Market economy: decisions made by individuals. 4. Mixed economy: a combination of both.

Front

Define opportunity cost and tradeoff?

Back

Opportunity cost is the value of the next best alternative foregone when making a decision. A tradeoff is the act of giving up one benefit in order to gain another.

Front

What does a point on the PPC mean? A point outside the PPC? A point inside the PPC?

Back

A point on the PPC represents efficient production. A point outside the PPC is unattainable with current resources. A point inside the PPC indicates inefficiency.

Front

How do you calculate comparative advantage? What is absolute advantage?

Back

Comparative advantage is calculated by comparing opportunity costs. Absolute advantage refers to the ability to produce more of a good with the same resources than another producer.

Front

What does cost benefit analysis do, and how do you use it?

Back

Cost benefit analysis evaluates the total expected costs against the total expected benefits of a project or decision.

Front

Practice drawing out PPC curves

Back

PPC curves illustrate the trade-offs between two goods.

Front

Practice calculating comparative advantage

Back

Identify opportunity costs for each producer to determine comparative advantage.