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Unformatted text preview: Midterm Review: Scarcity (5): The fundamental concept of economics that indicate that there is less of a good freely available from nature that people would like. (Examples: apples and cars. Seawater is NOT scarce) Choice and (5-6, 87) : The act of selecting among alternatives. Competitive behavior and (8): Competition is a natural outgrowth of scarcity and the desire of human beings to improve their conditions. Objective nature of (7): Scarcity is an objective concept that describes a factual situation in which the limited nature of our resources keeps us from being able to completely fulfill our desires for goods and services. Public-sector consumption and (126-127): Scarcity imposes the aggregate consumption-payment link in both sectors. Rationing and (7): Scarcity makes rationing necessary. Rationing is allocating a limited supply of a good or resource among people who would like to have more of it. When price performs that rationing function, the good or resource is allocated to those willing to give up the most other things in order to get it. Vs. poverty (6-7): Poverty is a subjective concept that refers to a personal opinion of whether someone meets an arbitrarily defined level of income. Vs. shortages (87): Scarcity is inescapable and shortages are a result of prices being set below their equilibrium values (a situation that is avoidable if prices are permitted to rise). Opportunity Costs (9, 28, and 109): The highest valued alternative that must be sacrificed as a result of choosing an option. Opportunity costs are subjective because they depend on how the decision maker values his or her options. Decision making (29-30): Example: opportunity cost of going to college. Prices (65): The willingness of consumers to pay a price greater than a goods opportunity cost indicates that they value the good more than other things that could have been produced with the same resources. Production (64): The sum of the producers cost of each resource a good will equal the opportunity cost of production . Production possibilities curve (38-43): A curve that outlines all possible combinations of total output that could be produced assuming (1) a fixed amount of productive resources, (2) a given amount of technological knowledge, and (3) full and efficient use of those resources. Utility (10): The subjective benefit or satisfaction a person expects from a choice or course of action. Utility is highly subjective , often differing widely from person to person. Marginal (11): The effects of a change in the current situation. Example: a producers marginal cost is the cost of producing an additional unit of a product, given the producers current facility and production rate. ( Additional is often used as a substitute for marginal) Benefit curve (107-108): Shows the additional benefit associated with expanding the activity ( \)....
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This note was uploaded on 06/20/2011 for the course ECON 212 taught by Professor Greene during the Spring '11 term at Wayne State University.
- Spring '11