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Flashcards in Chapter 1 Deck (22):
1

Social Gain

Total Value - Total Cost

2

Marginal Gain

The cost to produce one unit of something

3

Economics

The discipline that studies how efficient decisions are made

4

Efficient Decisions

Choosing the most valuable alternative

5

Theory of Reveal Preference

Our Choices reveal our vaules

6

Characteristics of Value

-Value depends on the situation

-Value is different for different people

-Subsequent units of the same good have less value

7

Optimal Arrangement Principle

We choose the best first, second best second, etc.

8

No Free Lunch Principle

Every decision involves costs

9

Scarcity

We always have more wants than our resources can supply

10

Marginal Value

The value of the INDIVIDUAL UNITS of something

11

Marginal Analysis

We consume each unit for which the marginal value is at as great as the marginal cost

12

Demand

The relationship between possible prices of something and the quantities people are willing to buy

13

Supply

Relationship between the possible prices of something and the quantities people are willing to sell

14

Equilibrium Price

Consumers can buy all they want;
Producers can produce all they want

15

Consumer Gain

Total Value - Total Amount Paid

16

Producer Gain

Total Amount Paid - Total Cost

17

Supply Change

Based on technology changes or the prices of resources changes

18

Shortage

When the costs of production cause the price to be lower than the equilibrium price but the demand is still high

19

Economic Problem

Allocating resources to their most valuable uses

20

The Supply Curve is equal to the....

Marginal Cost Curve

21

The Demand Curve is equal to the.....

Marginal Value Curve

22

Law of Diminishing Returns

Decrease in the marginal output of a production process as the amount of labor increases