Economics — definition?
Study of resource management in society.
Microeconomics — focus?
Decisions of households and firms.
Macroeconomics — focus?
Economy-wide phenomena like growth and unemployment.
Decision tradeoffs — reason?
Resources are limited, so sacrifices are necessary.
Opportunity cost — example?
Wages foregone when attending college.
Rational decision-making — basis?
Comparing marginal benefits and costs.
Incentives — effect?
Motivate predictable behavioral responses.
Models — purpose?
Simplify reality to analyze economic principles.
PPF — displays?
Maximum production combinations of two goods.
PPF slope — indicates?
Opportunity cost of one good in terms of the other.
Points on PPF — meaning?
Efficient and fully utilizing resources.
Points under PPF — meaning?
Underutilization or unemployment of resources.
Points above PPF — meaning?
Unattainable with current resources and tech.
Economic growth — effect?
Outward shift of the PPF.
Increasing opportunity cost — shape?
Bow-shaped or convex PPF.
Points on, under, above PPF — difference?
On: efficient; under: inefficient; above: impossible.
Scarcity — role?
Necessitates choices and tradeoffs.
Resource allocation — process?
Distributing limited resources among uses.
Tradeoff — definition?
Choosing one thing involves sacrificing another.
Labor requirement per good — metric?
Hours needed to produce one unit.
Feasible point — meaning?
On or inside the PPF, achievable with resources.
Unattainable point — meaning?
Outside the current resource limits.
Answer 11 questions on Fundamentals of Economics and Resource Tradeoffs.
1. What is the best definition of rational decision-making in economics?
2. What is the primary function of assumptions and models in economic analysis?
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