Ch 1 Flashcards
(27 cards)
Economics
Social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity
Economic Perspective
“economic way of thinking” Has scarcity and closely interrelated features
Opportunity Cost
To obtain more of one thing, society forgoes the opportunity of getting the next best thing
Utility
The pleasure, happiness, or satisfaction obtained from consuming a good or service
Marginal Analysis
Comparisons of marginal benefits and marginal costs
Scientific Method
1) Observing real-world behavior and outcomes
2) Based on those observations, formulating a possible explanation of cause and effect (hypothesis)
3) Testing this explanation by comparing the outcomes of specific events to the outcome predicted by the hypothesis
4) Accepting, rejecting and modifying the hypothesis, based on these comparisons,
5) Continuing to test the hypothesis against the facts. If favorable results accumulate, the hypothesis evolves into a theory
Economic Principle
A statement about economic behavior or the economy that enables prediction of the probable effects of certain actions
Other-Things-Equal Assumption
Certeris Paribus - The assumption that factors other than those being considered do not change
Microeconomics
The part of economics concerned with decision making by individuals customers, workers, households, and business firms.
Macroeconomics
examines either the economy as a whole or its basic subdivisions or aggregates, such as the government, household, or business sectors.
Aggregate
A collection of specific economic units treated as if they were one unit
Positive Economics
focuses on facts and cause-and-effect relationships. It includes description, theory development, and theory testing. Avoids value judgments.
Normative Economics
Economizing Problem
the need to make choices because economic wants exceed economic means
Budget Line
A schedule or curve that shows the various combinations of two products a consumer can purchase with a specific money income
Economic Resources
all natural, human, and manufactured rescources that go into the production of goods and services.
Land
Included all natural resources used in the production porcess. Forests, minerals, oil deposits, water resources, wind power, sunlight, and arable land.
Labor
The physical actions and mental activites that people contribute to the production of goods and services
Capital (or Capital Goods)
includes all manufactured aids used in producing consumer goods and services.
Includes all factory, storate, transportation, and distribution facilities
Investment
Spending that pays for the production and accumulation of capital goods
Entrepreneurial Ability
The entrepreneur takes the iniative in combining the resources of land, labor, and capital to produce a good or service.
Factors of Production
Land, labor, capital, and entrepreneural ability. AKA. Inputs
Consumer Good
Products that satisfy our wants directly
Capital Goods
Products that satisfy our wants indirectly by making possible more effcient production of consumer goods
