Flashcards
CH 2 ECON Scarcity
Cards in this deck (17)
- 1Budget ConstraintAll possible consumption combinations of goods that someone can afford when ALL income is spent
- 2Opportunity SetAll possible consumption combinations of goods that doesn't use up entire income (Burgers and Bus Tickets)
- 3Opportunity costmeasures cost of what is given up in exchange of for something else
Next Best Alternative - 4Opportunity Cost of a $2 burger is ____.Four 50 cent bus tickets
"Next Best Alternative" - 5Marginal Analysiscomparing benefits and costs of choosing a little more or a little less of a good; decisions on the margin
- 6Law of Diminishing Marginal Utility (happiness and satisfaction of banana)Consuming more of a good or service, the utility (satisfaction) we get from additional good or service tends to become smaller than what we received from earlier units
- 7Production Possibility Frontier (PPF)diagram that shows productively efficient combinations of two products that an economy can produce given the resources available
- 8Law of Diminishing (Marginal) Returns (Education and Healthcare)as additional increments of resources are added to producing a good or service, the marginal benefit from those additional increments decline (increase education becomes more costly when decreasing more healthcare)
- 9Q: PPF curved because of the ______.Law of Diminishing (Marginal) Returns
- 10Productive Efficiencyimpossible to produce more of one good or service without decreasing another good or service (maximum points on PPF curve)
- 11Allocative Efficiencymix of goods being produced represents the mix that society most desires
- 12Absolute Advantagecountry can produce more of a good than competitors using the same amount of resources
- 13Comparative Advantage "Good at Everything Neighbor while you're Bad at Everything"Country produces good at lower cost in terms of other goods; lower opportunity cost; still teams up with other countries to make production
- 14Is Trade an Absolute Advantage or Comparative Advantage?Comparative Advantage
- 15Positive Statementdescribes the world as is
- 16Normative Statementdescribes how the world SHOULD be, how agents should behave in economy
- 17What's the comparative advantage of Canada? MS AB Canada 2000 1000 USA 3000 6000opp cost MS AB
Canada 1000/2000= 0.5 2000/1000=2
USA 6000/3000=2 3000/6000=0.5
comparative cost of Canada= MS