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Module 2
| Term | Definition |
|---|---|
| Economics | the study of scarcity |
| Microeconomics | the study of the decisions of individuals, households,and businesses in specific markets |
| Macroeconomics: | the study of the overall functioning of an economy such as basic economic growth, unemployment or inflation |
| Absolute advantage | The ability to produce something with fewer resources than other producers would use to produce the same thing |
| Opportunity Cost | Other positive options that will be missed if another product or service is acquired |
| The Law of Demand: | the higher the price, the less people demand |
| Behavioral economics | study of the social, cognitive, and emotional factors on economic decisions and the consequences for market prices, profits, and business decisions |
| Utility | a measure of satisfaction received by consuming a good or service |
| Endowment Effect: | people value goods or services once they own them more than before they own them |
| Divestiture Aversion: | People are more reluctant to lose items that they possess than they were motivated to obtain them |
| Inequity aversion | willingness to give up potential gain to prevent someone else from getting even more |
| Utilitarian View: | the greatest happiness for the greatest number of people |
| Social welfare view | invest in maximizing the utility of those with the lowest utility |
| Pareto optimal: | an efficient system in which no allocation of given goods can be made without making at least one individual or group worse off |
| Reciprocity | exchange of goods and services without regard to their value, without regard to their value, expecting that it will balance out over time |
| Comparative advantage | The situation in which a country or firm has a lower opportunity cost for a good or service than do other firms or countries |
| Competition | The effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms. |
| Cost of production | All resources used in producing goods and services, for which owners receive payments. |
| Law of supply | The higher the price, the more suppliers are willing to provide |
| Incentives | Factors that motivate and influence the behavior of households and businesses |
| Increase in productivity | When the same amount of an output can be produced with fewer inputs; when more output can be produced with the same amount of inputs; or a combination of the two. |
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