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MicroEconomics
Exam One (ch.1-5)
| Term | Definition |
|---|---|
| Economics (ch.1) | The scientific study of how people make decisions in a world where wants and needs are unlimited but resources to meet our wants and needs are scarce. |
| Land (ch.1) | All naturally occurring resources like water, timber, minerals, plant and animal life, and so forth. |
| Labor (ch.1) | The human effort in the process of producing goods and services. |
| Capital (ch.1) | (1) Physical: the equipment and tools used to produce goods and services. (2) Human: the knowledge, education, training, and skills we bring to the process of production. |
| Entrepreneurship (ch.1) | "on who assumes risk" - The men and women who use their resources to invent new products and start new business ventures. |
| Scarcity (ch.1) | The ongoing imbalance between out wants and needs and the resources available to meet those wants and needs. |
| Rational Behavior (ch.1) | When human beings engage in a decision-making process where, at the time the decision is made, the expected direct benefits of the decision equal, or exceed, the expected direct cost, plus the opportunity cost of their decision. |
| Benefits (ch.1) | The monetary and/or non-monetary gain expected from any decision. |
| Direct Cost (ch.1) | The known, or expected out of pocket costs and the probability of something negative occurring as a result of the decision. |
| Opportunity Cost (ch.1) | The cost of choosing to use resources for one purpose, measured by the value of the next best alternative for using those resources. |
| Irrational Behavior (ch.1) | An individual makes a decision knowing that the costs exceed the benefits. |
| The Principle of Comparative Advantage (ch.1) | A person, or business or nation can gain production and consumption possibilities by specializing in the production of goods and services that can be produced at a lower opportunity cost than the next best competitor can. |
| Incentives (ch.1) | Anything that changes the costs and benefits of a decisions. |
| Marginal Analysis (ch.1) | The examination of incremental changes in the benefits and costs of any decision. |
| Marginal Cost (ch.1) | The additional cost of any repeated decisions. |
| Marginal Benefit (ch.1) | The additional benefit of any any repeated decision. |
| Normative Analysis (ch.1) | A way of looking at economic policies that rely on our value judgments about "what ought to be." |
| Positive Analysis (ch.1) | A way of looking at economic policies without the use of one's value judgments. |
| The Law of Unintended Consequences (ch.1) | The principle that for every law, or policy that is implemented with one set of objectives or goals in mind, there is always one or more unintended consequences that will stem from that law or policy. |
| Capitalism (ch.2) | An economic system that is based on free exchange, contracts, and self-interested activities that do not violate the right to life, liberty, and private property. |
| Positive Externality (ch.2) | A transaction between two parties leads to spillover benefits to individuals who were not part of the original transaction. |
| Moral Hazard (ch.3) | The prospect that a person, or institution insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk. |
| Regulation (ch.3) | A rule or law imposed by government on business firms. |
| Economic Model (ch.4) | A way of explaining how some sector of the economy function. |
| Dependent Variable (ch.4) | A variable whose value depends on some other variable. |
| Independent Variable (ch.4) | A variable whose value is independent of other variables. |
| Coefficient (ch.4) | The mathematical connection between the independent and dependent variable that is discovered in the algebraic process known as multiple regression analysis. |
Created by:
lizhopper2
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