ECON Vocb. Ch 1-5
Terms
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- Economics
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-The study of scarcity
-The study of unlimited wants and limited resources. - Scarcity
- -implys that society has unlimited wants and limited resources.
- Scarce Goods
-
Something....
(money,time,almosteverything)
must be given up to obtain it. (Clean air is NOT scarce) - Opportunity Cost (O.C)
- *What you give up to get that item*--Highest value foregone alternitive..*
- Positive Statements
-
Has to do with what IS...
(FACTS not opinions)
Can it be proven true OR false - Normative Statements
- Have to do with what SHOULD be.
- How do we make positive statements in economics?
- Models or Theories
- Supply and Demand graphs are what type of diagrams?
- L(X) diagrams
- 4 Properties of models
-
1) Simple (Answer the ?)
2) General
3) Useful in Predicting
4) Testable - PPF-Production Possibilities Frontier
-
A graph that shows the various combinations of output that the economy can possibly produce.
(Always in units of other goods) - Absolute Advantage
- Ability to produce MORE of a good
- Comparative Advantage
-
Low opportunity cost producer.
(Who gives up less of another good to produce good X has less O.C)-Produce more- - Gains from Trade
- Trade enables specialization in what we have a comparative advantage in producing.
- Complete specialization
- Comsumption does NOT equal production.
- Bowing of a graph
- Due to increasing opportunity cost.