WGU - D089 Principles of Economics

WGU - D089 Principles of Economics 28 studiers today 3.8 (16 reviews) Students also studied Terms in this set (263) Western Governors UniversityD 196 Save pre assessment d089 70 terms Loveysbg21610 Preview D089 - Module 1 Teacher 37 terms WGU_Econ_CI_Team Preview The Economic Problem Teacher 21 terms WGU_Econ_CI_Team Preview Princip 32 terms wtf EconomicsThe study of how humans make decisions in the face of scarcity.Factors of ProductionDescribes theninputs used in the production of goods or services to make an economic profit.MacroeconomicsA branch of economic dealing with the performance, structure, behavior and decision making of an economy as a whole.MicroeconomicsA branch of economics that studies the behavior of individuals, and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.ScarcityThe basic economic problem, the gap between limited, scarce, resources and theoretically limitless wants Opportunity CostThe next best alternative that is given up when a choice is made.Think at the MarginThinking about what the next step or an additional action means for a person.Marginal BenefitThe incremental increase in the benefit to a consumer caused by the consumption of one additional unit of a good or service.1st (Principles of Economics )Everyone faces tradeoffs 2nd (Principles of Economics )The cost of something is determined by what you give up to get it.3rd (Principles of Economics )Rational people think at the margin.

4th (Principles of Economics )People respond to incentives.5th (Principles of Economics )Trade can benefit everyone.6th (Principles of Economics )Markets are a sound method of organizing economic activity.7th (Principles of Economics )Government may be able to improve market outcomes.8th (Principles of Economics )A nation's standard of living depends on its ability to produce.9th (Principles of Economics )Printing too much money causes prices to rise.10th (Principles of Economics )There is short-run tradeoff between inflation and unemployment.Economic SystemsA system of the production, resource allocation, and distribution of goods and services within a society or give geographic area.Traditional EconomyA economic system that relies on customs, history. and time-honored beliefs.Guides economic decisions such as production and distribution.Command EconomyAn economic system in which production, investment, prices, and incomes are determined centrally by a government.(Centralized) Market EconomyAn economic system in which the decisions regarding investment, production, and distribution are guided by the price signals created by the forces of supply and demand (Decentralized) Mixed EconomyAn economic system in which both private enterprise and a degree of state monopoly (usually in public services, defense, infrastructure, and basic industries) coexist.Positive EconomicsThe study of economics concerned with what is and what will happen if a course of action is taken or not taken.Normative EconomicsThe study of economics with what is and what will happen if a course of action is taken or not taken.Economic ModelsA simplified version of reality that allows people to observe, understand and make predictions about economic behavior.Economic IndicatorsA statistic about an economic activity.Circular Flow ModelAn economic model that shows the flow of money and goods through the economy. The most common form of this model shows the circular flow of income between the household sector and the business sector.

Human CapitalThe accumulated skills and education of workers.Research and DevelopmentTerm commonly used to describe the activities undertaken by firms and other entities such as individual entrepreneurs to create new or improved products and processes.PartnershipA legal form of business operation between two or more individuals who share management and profits.MergerCombining two companies into a single larger company Factors of ProductionDescribes the inputs used in the production of goods or services to make an economic profit.Financial CapitalMost commonly refers to assets needed by a company to provide goods or services as measured in terms of money value.Profit (Q/A)What is the payment of production for entrepreneurship?Rent (Q/A)What is the payment of production for the use of land or natural resources?Interest (Q/A)What is the payment for the use of capital?Wages (Q/A)What are the payments for the use of labor?EfficientlyProducing the maximum amount of goods and services possible given available resources and technology.Production Possibilities FrontierA graphical representation used by economists to show the alternative communications of two goods or services that an economy can produce with the given resources and technology when the resources are fully and efficiently used at a given point in time.Budget ConstraintRepresents all the combinations of goods and services that a consumer may purchase given current prices within his or her given income.Opportunity SetAll possible combinations of consumption that someone can afford given the prices of goods and the individuals income.HomogeneousA resource having one form of set of skills.HeterogeneousA resource having two different forms of skills.Capital GoodsGoods that are used in producing other goods rather than being bought by consumers.Consumer GoodsGoods bought and used by consumers.

Law of Increasing Opportunity CostsOnce all factors of production are at maximum output and efficiency, producing more of one good requires giving up an increasing amount of the other good.UnderutilizingThe condition in which economic resources are not being used to their full potential InefficientThe underemployment of any of the four economic resources.Constant Opportunity Cost of Production (Q/A) The upward (positive) slope of the production possibility frontier represents what characteristic?Scarcity (Q/A)The downward (Negative ) slope of the production possibility frontier represents what characteristic?The Law of Diminishing ReturnsThe point where the level of profits or benefits gained is less than the amount of money or energy invested.The Law of Diminishing Returns (Q/A)The outward bending shape of the production possibilities frontier represents what characteristic?PriceThe amount of money expected, required or given in payment for something.SupplyA fundamental economic concept that describes the total amount of a specific good or service that is available to consumers.DemandConsumers willingness and ability to consume a given good.Equilibrium PriceThe price where the quantity demanded is equal to the quantity supplied.Demand ElasticityHow responsive the quantity demanded is to a change in percentage terms.Quantity DemandedTotal number of units purchased at a specific price.Demand ScheduleA chart that shows the number of goods or services demanded at specific prices.Law of DemandThe common relationship that a higher price leads to a lower quantity demanded of a certain good or service and a lower price leads to a higher quantity demanded while all other variables are held constant.Quantity SuppliedThe quantity of a commodity that producers are willing to sell at a particular price at a particular point of time.Excess SupplyAt the existing price the quantity supplied exceeds that quantity demanded also called a surplus.Excess DemandAt the existing price the quantity demanded exceeds the quantity supplied also called shortage.