TCU Microeconomics Chapter 1 Test – Reynolds

Social science concerned with making optimal choices under conditions of scarcity

-limits placed on amounts and types of goods/services available

-restricts options and demands choices

-Needing to make choices because economics wants exceed economic means

-Forces you to pick and choose how you want to spend your money

To obtain more of one thing, society forgoes the opportunity of getting the next best thing that could have been created with those resources

-Ex: If you spend time and money going to a movie, you cannot spend that time at home reading a book, and you can't spend the money on something else

Microeconomics is the study of economics at an individual, group or company level
Ex: Product price, income, revenue, expenditures, individual businesses

Macroeconomics is the study of a national economy as a whole
Ex: Interest rates, business cycle, inflation

Positive: WHAT IS
Analysis of FACTS and evidence to establish scientific generalizations about economic behavior

Normative: WHAT OUGHT TO BE
Uses value JUDGEMENTS on what economy should look like

All natural resources: forests, mineral/oil deposits, water sources, wind power, sunlight, arable land

-A curve showing the different combinations of two goods or services that can be produced in a full-employment, full-production economy where the available supplies of resources and technology are fixed

-Line is a "constraint", showing limit of attainable outputs (past line is unattainable)

-Line moves outward when: increase in quality+quantity of sources, specialization and trade, improved production techniques

Inverse: 2 variables do the opposite thing

Direct: 2 variables do the same thing

-What will be produced?
-How will goods be produced?
-Who gets the output?
-How will the system change?
-How will the system promote progress?

Use your money to vote for the items/companies you want to stay in business

Physical actions and mental activities that people contribute to production

If you receive pay for your work, you contributed labor

All manufactured aids in producing consumer goods/services

Ex: factories, storage, transportation, distribution facilities, tools

The human resource that combines other sources to produce a product

Ex: Making decisions, innovate techniques, bear risk of failure

MB = MC

The pleasure or satisfaction after receiving a good or service

Behavior designed to increase personal satisfaction however it may be derived

Comparisons of MB and MC used for decision making

Tendencies for typical consumers, workers, businesses

Assumption that factors other than the ones being considered don't change

-Lets economy circumvent the output limits imposed by it's own production possibilities curve

-Increases the quantities of capital and consumer goods available to society

Collection of specific economic units treated as if they are one unit

Ex: Millions of consumers = Consumers

Schedule or curve that shows various combinations of 2 products a consumer can purchase with a specific income

Trade Offs: Ex: $100 = 5 $20 books OR 10 $10 movies
NOT BOTH

Spending that pays for production and accumulation of capital goods

The economy is employing all of it's available resources

The quality/quantity of the factors of production are a set amount

The state of technology (production methods) are constant

Consumer: Products + Services that satisfy human wants

Capital: Products that satisfy our wants indefinitely by making possible more efficient product of consumer goods

Lists different combos 2 products that can be produced with a specific set of resources, assuming full employment

As production increases, so does opportunity costs

-A larger total output as a result of

1. Increases in supplies of resources
2. Improvements in resource quality
3. Technological advances

Allows nations to get more of a desired good at less sacrifice of another good to help obtain a greater output

Ex: Instead of Florida trading oranges to China for turkey (idk), Florida can just buy the turkey from China so that a they don't have to lose their oranges

1. Make strategic business decisions
2. Combine resources of land, labor, capital goods to produce a good or service
3. Innovate
4. Take risks & initiative

-Set of institutional arrangements and a coordinating mechanism to respond to the economizing problem

-Determines goods, production numbers, how made, who gets what, accommodate change

-Keep gov. out of economy

-Pure capitalism

-Gov. protects economy from theft and aggression

-Establishes a legal environment for contracts to be enforced and people to interact

-Communism/Socialism

-Opposite of Laissez-Faire

-Gov. owns most/all property resources and makes their own decisions and economic plan for the country

-Gov. determines what, how, who makes what

-US economy (Capitalism/Free Economy)

-Mix of gov, initiatives w/ individual & firms

-Needs efficiency, incentives, freedom

-Offers high potential earnings (risks involved)

The right to own, control, destroy, employ things from land, capital, property, etc.

Ensures entrepreneurs & privée businesses can get and use economic resources to make and sell what they want and where they want

-Each economic unit tries to achieve it's own particular good

-Usually requires delivering something of value to others

Using resources to produce 1+ goods which are later exchanged for larger range of products

-Specialization makes use of differences in ability

-Fosters learning by doing

-Saves time

Exchanging goods and services

Creation of a new product wipes out position of existing product

Ex: Online streaming to CD's

Coming up with something great that benefits society while trying to make money

-Owned + managed by 1 person

-Work alone or with employees

2+ people own and operate together

-Independent legal entity

-Acquire resources, produce/sell products, incur debt, extend credit, sue and be sued

Business Owners

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