Economics flashcards
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2 decks
- Welcome to Economics! (Economics)Recall cards introducing economics. The core problem of scarcity: economics as the study of decision-making under scarcity, limited resources, and time as the ultimate scarce resource. The division of labor (Adam Smith, The Wealth of Nations, 1776; the pin factory), and why it raises production: comparative advantage, faster and higher-quality specialists, and economies of scale; specialization requires trade. The two branches of the field: microeconomics (individual agents) versus macroeconomics (the economy as a whole), the goals of macroeconomic policy, and monetary versus fiscal policy. How economists think: Keynes on economics as a method, theories versus models, and the circular flow diagram of households and firms in the goods-and-services and labor markets. How economies are organized: traditional, command, and market systems, private enterprise, globalization, exports and imports, GDP, and the rising ratio of exports to GDP.
- Choice in a World of Scarcity (Economics)Recall cards on how scarcity forces choice. The budget constraint: the combinations of two goods a consumer can afford (the Alphonso burgers-and-bus-tickets example), opportunity cost as the next best alternative given up, the slope of the budget line, marginal analysis, the law of diminishing marginal utility, utility maximization, and why sunk costs should not affect current decisions. The production possibilities frontier (PPF): attainable versus unattainable points, productive and allocative efficiency, the law of increasing opportunity cost, why the PPF bows outward, and comparative advantage. Confronting objections to the economic approach: positive versus normative statements, the self-interest assumption and Adam Smith's caveat, and economics as a descriptive rather than prescriptive analysis of behavior.