microeconomics 2000 lsu chapter 1

one who manages a household

the limited nature of society's resources

the study of how society manages its scarce resources.

study how people make decisions, how much they work, what they buy, how much they save, and how they invest their savings

principle 1

what are the two trade-offs society faces?

means that society is getting the maximum benefits from its scarce resources

means that those benefits are distributed uniformly among society's members.

what is an example of a policy aimed to equalize distribution of economic wellbeing?

principle 2

is what you give up to get that item

principle 3

people that systematically and purposefully do the best they can to achieve their objectives, given the available opportunities

describes a small incremental adjustment to an existing plan of action

what two things do rational people use when making decisions?

Principle 4

something that induces a person to act, such as the the prospect of a punishment or reward.

Principle 5

trade allows countries to specialize in what they do and enjoy a _________________of goods and services.

principle 6

their economies are operated on the premise that gov't officials were in the best position to allocate the economies scarce resources, centralized planning

an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services

in the 1776 book, " An Inquiry into the nature and causes of the wealths and nations", Adam Smith made the conclusion: households and firms interacting in markets as if they're guided by an __________________________ that leads them to desirable market housecomes

in any market, buyers look at their _____________ when determining how much to demand

in any market, sellers look at their _____________, when deciding how much to supply

adam smith believed that prices adjust to guide these individual buyers and sellers to reach outcomes that in many cases, _______________the well being of society as a whole.

what is an example of gov't intervening in the invisible hand's ability to coordinate the decisions of the households and firms by affecting the allocation of resources?

Principle 7

market economies needs institutions to enforce _____________________so individuals can own and control scarce resources.

a situation in which a market left on its own fails to allocate resources efficiently

what are the two causes of market failures?

the impact of one person's actions on the well-being of a bystander

the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices

principle 8

the quantity of goods and services produced from each unit of labor input

principle 9

an increase in the overall level of prices in the economy

principle 10