physical plants, machinery, and equipment used to produce other goods
is a shorthand expression for any resource provided by nature
is the mental and physical capacity of workers to produce goods and services. This resource is measured by the number of workers as well as the skills and quality of workers.
is the creative ability of individuals to seek profits by taking risks and combining resources to produce innovative products. It is not a separate source but rather is a special type of the resource.
A wheat farmer in Nebraska takes a risk and starts a new farm on land that was previously thought unfit growing wheat. If his new farm succeeds because of the farmer's new growing technique, the farmer will earn a substantial profit. Because it represents a person's creative input to production, the innovation of using a new farming technique is an...
A corn farmer in Montana uses knowledge gathered from the agricultural training program at the local university to improve his ability to produce corn. Because it represents a human input to production, education and training are examples of investment in..
is the condition in which human wants are forever greater than available supply of time, goods, and resources. ______ of a particular thing means there is not enough of that item to satisfy everyone who wants it.
Suppose that the hypothetical country of Andesland has a chronic scarcity of its staple grain, quinoa.
T/F: There is less quinoa available than residents of Andesland would like.
Suppose that hypothetical country of Paddyland has a chronic scarcity of its staple grain, rice.
T/F: People in Paddyland must be poor.
is the study of how individuals and firms make decisions and how they interact in markets. Therefore, ___________ are more likely to create models that analyze the decisions firms (such as pricing) and consumers (such as shopping choices), as well as how government policies affect those decisions.
is the study of matters affecting the entire economy. There, ____________ are more likely to create models that analyze the policy decisions of government and central banks, as well as how these decisions affect growth, inflation, and unemployment.
Micro/Macro: The effect of government tax policy on long-term economic growth
Micro/Marco: The effect of a cigarette tax on the quantity of cigarettes sold
Micro/Macro: The government's optimal spending level
Micro/Macro: The effect of a large government budget deficit on the economy's price level
Micro/Macro: The effect of the internet on the pricing of used cars
Micro/Macro: The effect of government regulation on a monopolist's production decisions
"All other things remain unchanged" is a key simplifying assumption that must be satisfied for a theory to be tested legitimately. This assumption allows concentration on the relationship between key variables without unnecessary complication of the model.
Economic model-building process
Problem identification -> Model development -> Testing a theory
One assumption that must be satisfied for a theory to be test legitimately is the _______ assumption.
In order to be useful, models require ____ assumptions.
Purpose of a model
is to create simplifying abstraction of reality in order to understand complex events. Complicating a model too much makes it of little use for this purpose.
is one that seeks to describe the world as it is
is one that offers opinion as to the way the world should be
Positive/Normative: Killing people is bad
Positive/Normative: By executing convicted murderers, the government can deter potential murderers and decrease the murder rate.
Positive/Normative: It is immoral for the government to kill people
Positive/Normative: The government should not execute anyone, even murderers.
Positive/Normative: Taxes are too high
Positive/Normative: If taxes were lowered, government revenues would actually increase
Positive/Normative: It is immoral for the government to redistribute money from one person to another.
Positive/Normative: When the government taxes the rich and gives more to the poor, it gives the rich an incentive to hide their earnings from the government