Microeconomics – Chapter 1

lack of enough resources to satisfy all desired uses of those resources

resource inputs used to produce goods and services (land, labor, capital, entrepreneurship)

all natural resources (land, crude oil, water, air, and minerals)

the skills and abilities to produce goods and services (both the quantity and the quality of human resources)

final goods produced for use in the production of other goods (ex. equipment, structures, etc)

the assembling of resources to produce new or improved products and technologies

the study of how best to allocate scarce resources among competing uses

the most desired goods or services that are forgone to obtain something else

an increase in national defenses implies more sacrifices of civilian goods and services (the factors of production devoted to producing military hardware aren't available for producing civilian goods)

the alternative combinations of final goods and services that could be produced in a given time period with all available resources and technology

illustrates the the full range of production choices in a chart or table

a graph that illustrates the full range of production choices; each point depicts an alternative mix of output that could be produced

the PPC illustrates these two essential principles; there is a limit to how much we can produce with available resources and we can obtain additonal quantities of a good only by reducing production of another good)

increase

Law that states: we must give up ever-increasing quantities of other goods and services in order to get more of a particular good.

maximum output of a good from the resources used in production

What does point y represent? (according to this image: http://edu.uoh.edu.cn/zlgc/sykc/sxy/zyxt/images/xt1_image006.gif)

What does point B represent? (according to this image: http://edu.

uoh.edu.cn/zlgc/sykc/sxy/zyxt/images/xt1_image006.gif)

According to this image (http://www.

harpercollege.edu/mhealy/ecogif/ppc/ppceg.gif): What does this graph represent?

an increase in output; an expansion of production possibilities

WHAT to produce, HOW to produce it, FOR WHOM to produce

The "invisible hand" determines what gets produced, how, and for whom. He also believed in "laissez faire": price signals and responses of the marketplace were likely to do a better job of allocating resources than any government could

the use of market prices and sales to signal desired outputs (or resource allocations)

the essential feature of the market mechanism

the doctrine of "leave it alone," of nonintervention by government in the market mechanism

emphasized how free markets tend to concentrate wealth and power in the hands of the few, at the expense of many.

The government had to OWN all the means of production to avoid savage inequalities.

the market was pretty efficient in organizing production itself, but the government would intervene when needed. Government should play an active but not all-inclusive role in managing the economy.

Tend to favor Adam Smith's laissez-faire approach

Think government intervention is needed to improve market outcomes.

an economy that uses both market signals and government directives to allocate goods and resources.

an imperfection in the market mechanism that prevents optimal outcomes. The invisible hand has failed to achieve the best possible outcomes.

government intervention that fails to improve economic outcomes

the study of aggregate economic behavior, of the economy as a whole

the study of individual behavior in the economy, of the components of the larger economy

the assumption of nothing else changing