ECON Chapter 1 Notes.txt

  1. What are the three basic economic questions?
    • 1. What to produce.
    • 2. How to produce.
    • 3. For whom to produce.
  2. Define Economics
    The study of how best to allocate scarce resources among competing uses.
  3. Define Opportunity Cost
    The most desired goods and services that are forgone in order to obtain something else.
  4. Define Factors of Production
    Resource inputs used to produce goods and service; e.g. land, land, capital, entrepreneurship.
  5. Define Scarcity
    Lack of enough resources to satisfy all desired uses of those resources.
  6. Define Production Possibilities
    The alternative combinations of goods and services that could be produced in a given time perior with all available resources and technology.
  7. Define Investment
    Expenditures on (production of) new plant and equipment (capital) in a given time period plus changes in business inventories.
  8. Define Economic Growth
    An increase in output (real GDP) an expansion of production possibilities.
  9. Define market mechanism
    The use of market prices and sales to signal desired outputs (or resource allocations)
  10. Define Laissez Faire
    The doctrine of ´┐Żleave it alone´┐Ż of nonintervention by government in the market mechanism.
  11. Define Mixed Economy
    An economy that uses both market and non-market signals to allocate goods and resources.
  12. Define Market Failure
    An imperfection in the market mechanism that prevents optimal outcomes.
  13. Define Externalities
    Costs (or benefits) of a market activity borne by a third party; the difference between the social and private costs (or benefits) of a market activity.
  14. Define government failure
    Government intervention that fails to improve economic outcomes.
  15. Define Marcoeconomics
    The study of aggregate economic behavior, of the economy as a whole.
  16. Define Microeconomics
    The study of individual behavior in the economy, of the components of the larger economy.
  17. Define Ceteris Paribus
    The assumption that nothing else changes
Card Set
ECON Chapter 1 Notes.txt
ISU ECON 1100 Chapter 1