explanation as to why economics assumes that people acting in self interest is not the same as selfishness
increasing one's own wage, rent, interest, or profit normally requires satisfying somebody else's wants; people make sacrifices for others (ex: time and money to charities)
opportunity cost
the next best alternative you give up for something else
concept of utility
the pleasure, happiness, or satisfaction obtained from consuming a good or service
all other things equal" assumption
all factors that impact demand will not change (cetrus paribus)
positive economics
objective, fact-based, relies on data
normative economics
subjective, value-based, opinion oriented
4 factors that determine the production possibility frontier
land, labor, capital, entrepreneurship
location on the PPF curve when we have unemployment
under the curve/inside of it
which society will grow faster and why: society that produces robots (capital goods) or society that produces consumer goods (pizzas)
society that produces robots will grow faster because robots have a greater return on investments than consumer goods
law of increasing opportunity cost
to produce more of one good, a larger amount of the other good must be sacrificed
how a society knows how much of an activity they should undertake/engage in
when marginal cost = marginal benefit
marginal benefit
maximum amount a consumer is willing to pay for an additional good or service; change in total benefit/change in quantity
marginal cost
the cost of producing one more unit of a good; change in total cost/change in quantity
why the marginal benefit curve slopes downwards
over time, marginal benefit decreases while quantity increases
budget constraint when the price of one good decreases or you receive more income
budget line shifts to the right and enables you to buy more goods and services
budget constraint when the price of one good increases
budget line shifts to the left and you buy less
why economists say there is no such thing as free lunch
resources are used to produce it, and because those resources have alternative uses, society gives up something else to get the "free" good
microeconomics
concerned with the financial decisions of individual customers, workers, business firms, etc
macroeconomics
examines the performance and behavior of the economy as a whole (economic growth, business cycle, interest rates, inflation, etc)
shape of PPF that represents constant opportunity cost
graph is a straight diagonal line leading away from the origin
shape of PPF that represents increasing opportunity cost
graph bows away from origin
shape of PPF that represents decreasing opportunity cost
graph bows towards the origin