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| The study of how people choose when faced with scarcity. |
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| Two types of economic statements |
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| Positive Statement & Normative Statement |
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| When there are more needs and wants than available resources. Permanent. |
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| It is assumed that all choices are rational choices. Made on margin. |
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| What you gain when you get something. Measured by what you are willing to give up in order to get it. |
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| Marginal Benefit > Marginal Cost |
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| Marginal Benefit < Marginal Cost |
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| Marginal Benefit = Marginal Cost |
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| Doing stupid things in a rational manner. |
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| Intend one thing to happen, but the adverse takes place. |
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Term
| Production Possibilities Curve |
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Definition
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Term
| Production Possibilities Curve Demonstrates... |
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Definition
- Scarcity
- All efficient and inefficient combinations of resource usage
- Minimum and maximum level of productivity at current time |
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Term
| Production Possibilities Frontier Demonstrates... |
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Definition
- All efficient combinations of resources
- Law of increasing costs |
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Term
| Underutilization use of resources is where on the production possibilities frontier? |
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Definition
| Under (to the left) of the curve |
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Term
| Efficient use of resources is where on the production possibilities frontier? |
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Definition
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Term
| Production impossibility is shown where on a production possibilities frontier? |
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Definition
| Above (to the right) of the curve. |
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Term
| Ceteris Paribus Assumption |
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Definition
- Used when examining all graphs in economics
- Assumes "all other things remain constant"
- Given current production possibilities curve, we must assume that we are unable to attain more factors of production |
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Term
| 3 Ways to attain efficient level of productivity |
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Definition
- Produce more of one
- Produce more of the other
- Produce more of both |
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Definition
| As resources are shifted from producing X and Y, we must give up more of X to get more of Y. |
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| Ways to obtain more resources |
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Definition
| Acquire more land, labor, or capital |
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| Increase in productivity. Graph will... |
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Definition
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| Decrease in productivity. Graph will... |
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Definition
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Term
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Definition
| Government must decide to make more goods for people or for military |
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Definition
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Definition
| Using resources in such a way to maximize the production of goods and services. |
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Definition
| Using fewer resources than an economy is capable of |
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