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Macroeconomics
Chapter 1 The Economic Approach
Term | Definition |
---|---|
Scarcity | Fundamental concept of economics that indicates that there is less of a good freely available from nature than people would like. |
Objective | A fact based on observable phenomena that is not influenced by differences in personal opinion. |
Subjective | An opinion based on personal preferences and value judgements. |
Opportunity Cost | The highest-valued alternative that must be given up to engage in an activity. |
Centrally Planned Economy | An economy in which the government decides how economic resources are allocated. |
Market Economy | An economy in which the decisions of households and firms interacting in markets allocate economic resources. |
Mixed Economy | An economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in allocation of resources. |
Productive Efficiency | A situation in which a good or service is produced at the lowest possible cost. |
Voluntary Exchange | A situation that occurs in markets when both the buyer and seller of a product are made better off by the transaction. |
Equity | The fair distribution of economic benefits. |
Economic Variable | Something measurable that can have different values. eg. Incomes of doctors |
Positive Analysis | Analysis concerned with what is. |
Normative Analysis | Analysis concerned with what ought to be. |
Microeconomics | The study of how household and firms make choices, how they interact in markets, and how the government attempts to influence their choices. |
Macroeconomics | The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth. |