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Macro Ch 1
Economics
| Question | Answer |
|---|---|
| Goods | Anything from which individuals receive utility or satisfaction |
| Utility | The satisfaction one receives from a good |
| Bad | Anything from which individuals receive disutility or dissatisfaction |
| Disutility | The dissatisfaction one receives from a bad |
| Land | All natural resources, such as minerals, forests, water, and unimproved |
| Capital | Produced goods that can be used as inputs for further production, such as factories, machinery, tools, computers, & buildings |
| Entrepreneurship | The talent that some people have for organizing the resources of land, labor, and capital to produce goods, seek new business opportunities, and develop new ways of doing things. |
| Scarcity | The condition in which or wants are greater than the limited resources available to satisfy those wants |
| Economics | The science of scarcity; the science of how individuals and societies deal with the fact that wants are greater than the limited resources available to satisfy those wants |
| Rationing Device | A means for deciding who gets what of available resources and goods |
| Competition exists because of _________ | scarcity |
| Whatever the rationing device is... | people will compete for it |
| Opportunity Cost | The most highly valued opportunity or alternative forfeited when a choice is made |
| There is no such thing as free lunch | Opportunity costs are incurred whenever choices are made. |
| The higher the opportunity cost of doing something is... | The less likely it will be done |
| Benefits rarely come w/o | Costs |
| Marginal Benefits | Additional benefits: the benefits connected w consuming an additional unit if a good or undertaking one more unit of an activity |
| Marginal Costs | Additional costs; the costs connected with consuming an additional unit of a good or undertaking one more unit of an activity |
| Decisions at the Margin | Decisions making characterized by weighing the additional (marginal) benefits of a change against the additional (marginal) costs of a change with respect to current conditions |
| Efficiency | Exists when marginal benefits equal marginal cots |
| Incentive | Something that encourages or motivates a person to undertake an action |
| Exchange (trade) | The giving up of one thing for something else |
| Ceteris Paribus | A Latin term meaning "all other things constant" or "nothing else changes" |
| Theory | An abstract representation of the real world designed with the intent to better understand it. |
| Abstract | The process (used in building a theory) of focusing on a limited number of variables to explain or predict an event |
| Positive Economics | The study of "what is" in economics |
| Normative Economics | The study of "what should be" in economics |
| Microeconomics | Branch of economics that deals with human behavior and choices as they relate to relatively small units: an individual. a firm an industry, a single market |
| Macroeconomics | Branch of economics that deals with human behavior choices as they relate to highly aggregate markets(e.g. the goods & services market) or the entire economy |
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