Chapter 1 Flashcards
(17 cards)
What is economics
The study of how individuals, businesses and institutions make social choices to optimize their level of satisfaction under conditions of scarcity
Opportunity cost
The value of the next best alternative that must be forgone in order to undertake this activity
Opportunity cost explanation
What was sacrificed to do something else. Scarcity creates opportunity cost
Rational behaviour
The desire to maximise levels of utility
Will act rationally if price of a good decreases
Utility
Satisfaction obtained from consuming a good or service
Marginal analysis
“a change in/ extra”
Explains impact of change
Decision to obtain the marg benefit associated with some specific option always includes the marg cost of forgoing something else (opp cost)
Marginal income
Change in income
Marginal production
Change in amount of units
Marginal cost for additional products
Change in price
Scientific method
Procedure for the systematic pursuit of knowledge involving the observations of facts and the formulation and testing of hypotheses to obtain theories, principles and laws
Economic principles
Tools for ascertaining cause and effect
Analyse behaviour in producing, exchanging and consuming goods and services
Economic principles
- Generalisations
- Other-things-equal assumption
- Graphical expression
Macroeconomics
Aspects that include the whole economy
Microeconomics
Individual units/ portion of the economy
Postive economics
“ what is”
Facts
Scientific-based analysis
Normative economics
“what ought to be”
Ideas
What the economy should be
Aggregate
Collection of specific economic units treated as if they were 1 unit (sum of)
