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Macro Chap 1
Terms and definitions
| Question | Answer |
|---|---|
| Scarcity | A situation in which unlimited wants exceed the limited resources available to fulfill those wants. |
| Economics | The study of the choices people make to attain their goals, given their scarce resources. |
| Economic Model | A simplified version of reality used to analyze real-world economic situations. |
| Market | A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade. |
| Marginal Analysis | Analysis that involves comparing marginal benefits and marginal costs. |
| Trade-off | The idea that because of scarcity, producing more of one good or service means producing less of another good or service |
| Opportunity cost | The highest-valued alternative that must be given up to engage in an activity. |
| Centrally planned economy | An economy in whicich the government decides how economic resources will be 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 the allocation of resources. |
| Productive efficiency | A situation in which a good or service is produced at the lowest possible cost. |
| Allocative efficiency | A state of the economy in which production is in accordance with consumer preferences; in particular, every good or service is produced up to the point where the last unit provides marginal benefit to society equal to the marginal cost of producting it. |
| 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 benefit. |
| Economic variable | Something measurable that can have different values, such as the wages of softeare programmers. |
| Positive analysis | Analysis concerned with what is. Measures the costs and benefits of different courses of action/policy. Economic analysis is a positive analysis (NOT normative analysis). |
| Normative analysis | Analysis concerned with what ought to be. Decision of whether an action is good or bad and is based on how people evaluate the trade-off involved. This involves person's values and political views. |
| Microeconomics | The study of how households 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. |
Created by:
ace100
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