Chapter 1 Flashcards
(15 cards)
is the discipline that studies how efficiently decisions are made
Economics
involve choosing the most valuable alternative
Efficient Decisions
when our choices reveal our values
theory of revealed preference
value depends on the situation, value is different for different people, and subsequent units of the same good have less value
characteristics of value
the idea that we first choose the best then the second best and so on
optimal arrangement principle
the most that an individual is willing to sacrifice to obtain that something
the value of something to an individual
because of the stuff we exchange them for
why do value in dollars?
is the value of the best alternative which is sacrificed when a decision is made
cost
choosing an alternative means that means that one must sacrifice at least one other alternative
no free lunch
the study of the entire economy
macroeconomics
we have many more wants than our resources can satisfy
scarcity
the value of the individual units of that something
marginal value
as you add workers to a production facility, eventually they become less productive
law of diminishing returns
the relationship between the possible price of something and the quantities that people are willing to buy, all things being equal
demand
the relationship between the possible prices of something and the quantities that people or firms are willing and able to sell, other things equal
supply
