Chapter 1: The Scope And Method Of Microeconomics Flashcards
What is Economics?
It is the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided.
What are the three fundamental concepts of Microeconomics?
1.Opportunity Cost
2.Marginalism
3.Working of Efficient Markets
What is Opportunity Cost?
It is the best alternative that we forgo or give up when we make a choice or a decision.
What is Marginalism?
It is the process of analyzing the additional or incremental costs or benefits arising from a choice or decision
What are efficient markets?
It is a market in which profit opportunities are eliminated almost instantaneously.
Why Study Economics?
- To Learn a way of Thinking
- To Understand Society
- To be an informed citizen
What is Microeconomics?
It is the study of functioning of individual industries and the behavior of individual economic decision making units: firms and households.
What is Macroeconomics?
It is the branch of economics that examines the economic behavior of aggregates (income, employment, output) on a national scale.
What is Positive Economics?
It is an approach to economics that seeks to understand behavior and the operation of systems without making Judgements.
It describes what exists and how it works.
What is Normative Economics (Policy Economic)?
It looks at the outcomes of economic behavior and asks whether they are good or bad and whether they can be made better.
What are the 4 criteria used to judge Economic Outcomes?
- Efficiency
- Equity
- Growth
- Stability
What is Efficiency (Allocative Efficiency)?
It is the condition in which the economy is producing what people want at least possible cost.
What is Equity?
It is Fairness which lies in the eye of the beholder.
What is Growth?
It is an increase in the total output of an economy.
What is Stability?
It refers to the condition in which national output is growing steadily, with low inflation and full employment of resources.
