Chapter 1 Flashcards
(16 cards)
Economics
The study of how individuals, businesses and institutions make social choices, to optimize their level of satisfaction under conditions of scarcity.
Economist
A person who will advise the government on how to spend taxpayers’ money efficiently.
Scarcity
Limited time, goods & services.
Opportunity Cost
The value of the next best alternative that must be forgone in order to undertake this activity.
Rational Behaviour
Self interest. The desire to maximize the level of satisfaction (utility).
Rational Consumer
The greatest possible utility with unlimited wants/ needs & certain budget constraints.
Rational Producer
To maximize profit with cost constraints & certain product techniques.
Utility (U)
Pleasure/ satisfaction obtained from consuming a good/ service.
Marginal Analysis
Scientific Methods
Procedure for systematic pursuit of knowledge in volving observations of facts and formulating and testing of hypotheses to obtain theories, principles and laws.
Economic Principles
The cause and effect through generalization, other-things-equal and graphical expressions.
Macro-economics
Examines economy as whole, basic subdivisions and aggregates; such as government, households and business sectors.
Micro-economics
Concerned with individual units; such as a person, a household, firm or industry.
Positive Economics
Focuses on facts and cause-and-effect relationships.
Description, theory development and -testing
Normative Economics
Incorporates value judgements what economy SHOULD look like.
Expressions of support for particular policies.
Straight Line Equation
y = a + bx
