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Econ Chpt 1

Terms & Concepts

The social science concerned with how individuals, institutions, & society make optimal (best) choices under conditions of scarcity. Economics
A view point that envisions individuals & institutions making rational decisions by comparing the marginal benefits & marginal costs associated with their actions. Economic Perspectives
The amount of other products that must be forgone or sacrificed to produce a unit of a product. Opportunity Cost
The want-satisfying power of a good or service; the pleasure or satisfaction a consumer obtains from the consumption of a good or service. Utility
The comparison of marginal (extra) or (additional) benefits & marginal costs usually for decision making. Marginal Analysis
procedure for the systematic pursuit of knowledge involving the observation of facts & the formulation & testing of hypothesis to obtain theories, principles, & laws. Scientific Method
A widely accepted generalization about the economic behavior of individual or institutions. Economic Principle
The assumption that factors other than those being considered are held constant; ceteris paribus assumption. Other-Things-Equal Assumption
The part of economics concerned with decision making by individual units such a household, or firm, or an industry, & with individual markets, specific goods & services & products & resource prices. Microeconomics
The part of economics concerned with the economy as a whole. Macroeconomics
A collection of specific economic units treated as if they were one. For example, all prices of individual goods & services are combined into a price level or all units of output are aggregated into gross domestic product. Aggregate
The analysis of facts or data to establish scientific generalizations about economic behavior. Positive Economics
The part of economics involving value judgments about what the economy should be like; focused on which economic goals & policies should be implemented; policy economics. Normative Economics
The choices necessitated because society’s economic wants for goods & services are unlimited but the resources available to satisfy these wants are limited (scarce). Economizing Problem
A lines that shows the different combinations of two products a consumer can purchase with a specific money income, given the products’ prices. Budget Line
The land, labor, capital & entrepreneurial ability that are used in the production of goods & services; productive agents; factors or production. Economic Resources
Natural resources (“gifts from nature”) used to produce goods & services. Land
People’s physical and mental talents & efforts that are used to help produce goods & services. Labor
Human made resources (“buildings, machinery & equipment”) used to produce goods & services; goods that do not directly satisfy human wants; also called capital goods. Capital
Spending for the production & accumulation of capital & additions to inventories. Investment
The human resource that combines the other resources to produce a product; makes non routine decisions, innovates & bears risks. Entrepreneurial Ability
Economic resources: land, capital, labor & entrepreneurial ability. Factors of Production
Products & services that satisfy human wants directly. Consumer Goods
A curve showing the different combinations of two goods or services that can be produced in a full employment, full production economy where the available supplies of resources & technology are fixed. Production Possibilities Curve
The principles that as the production of goods increases, the opportunity cost or producing an additional unit rises. Law of Increasing Opportunity Costs
An outward shift in the production possibilities curve that results from an increase in resource supplies or quality or an improvement in technology; (2) an increase of real output (gross domestic product) or real output per capita. Economic Growth
What does optimal mean? Best
Created by: stamberger