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-a
Macro
| Question | Answer |
|---|---|
| Scarcity | Fundamental concept of economics that indicates that there is less of a good freely available from nature than people would like |
| Choice | The act of selecting among alternatives. |
| Resource | An input used to produce economic goods. Land, labor, skills, natural resources, and capital are examples. Throughout history, people have struggled to transform available, but limited, resources into things they would like to have—economic goods. |
| Capital | Human-made resources (such as tools, equipment, and structures) used to produce other goods and services. They enhance our ability to produce in the future. |
| Subjective | An opinion based on personal preferences and value judgments. |
| Rationing | Allocating a limited supply of a good or resource among people who would like to have more of it. When price performs the rationing function, the good or resource is allocated to those willing to give up the most “other things” in order to get it. |
| Economic theory | A set of definitions, postulates, and principles assembled in a manner that makes clear the “cause-and-effect” relationships. |
| Eight Guideposts to Economic Thinking (1-2) | 1. THE USE OF SCARCE RESOURCES IS COSTLY, SO DECISION MAKERS MUST MAKE TRADE-OFFS. 2. INDIVIDUALS CHOOSE PURPOSEFULLY—THEY TRY TO GET THE MOST FROM THEIR LIMITED RESOURCES. |
| Eight Guideposts to Economic Thinking (3-5) | 3. INCENTIVES MATTER—CHOICE IS INFLUENCED IN A PREDICTABLE WAY BY CHANGES IN INCENTIVES 4. INDIVIDUALS MAKE DECISIONS AT THE MARGIN. 5. ALTHOUGH INFORMATION CAN HELP US MAKE BETTER CHOICES, ITS ACQUISITION IS COSTLY. |
| Eight Guideposts to Economic Thinking (6-8) | 6. BEWARE OF THE SECONDARY EFFECTS: ECONOMIC ACTIONS OFTEN GENERATE INDIRECT AS WELL AS DIRECT EFFECTS. 7. THE VALUE OF A GOOD OR SERVICE IS SUBJECTIVE 8. THE TEST OF A THEORY IS ITS ABILITY TO PREDICT. |
| Opportunity cost | The highest valued alternative that must be sacrificed as a result of choosing an option. |
| Economizing behavior | Choosing the option that offers the greatest benefit at the least possible cost. |
| Utility | The subjective benefit or satisfaction a person expects from a choice or course of action. |
| Marginal | Term used to describe the effects of a change in the current situation. For example, a producer’s marginal cost is the cost of producing an additional unit of a product, given the producer’s current facility and production rate. |
| Secondary effects | The indirect impact of an event or policy that may not be easily and immediately observable. In the area of policy, these effects are often both unintended and overlooked. |
| Scientific thinking | Developing a theory from basic principles and testing it against events in the real world. Good theories are consistent with and help explain real-world events. Theories that are inconsistent with the real world are invalid and must be rejected. |
| Positive economics | The scientific study of “what is” among economic relationships. |
| Normative economics | Judgments about “what ought to be” in economic matters. cannot be proven false because they are based on value judgments. |
| Ceteris paribus | Latin Term meaning “other things constant” that is used when the effect of one change is being described, recognizing that if other things changed, they also could affect the result. |
| Fallacy of composition | Erroneous view that what is true for the individual (or the part) will also be true for the group (or the whole). |
| Microeconomics | The branch of economics that focuses on how human behavior affects the conduct of affairs within narrowly defined units, such as individual households or business firms. |
| Macroeconomics | The branch of economics that focuses on how human behavior affects outcomes in highly aggregated markets, such as the markets for labor or consumer products. |
| Trade Creates Value | 1. WHEN INDIVIDUALS ENGAGE IN A VOLUNTARY EXCHANGE, BOTH PARTIES ARE MADE BETTER OFF 2. BY CHANNELING GOODS AND RESOURCES TO THOSE WHO VALUE THEM MOST, TRADE CREATES VALUE AND INCREASES THE WEALTH CREATED BY A SOCIETY’S RESOURCES. |
| Transaction costs | The time, effort, and other resources needed to search out, negotiate, and complete an exchange. |
| Middleman | A person who buys and sells goods or services or arranges trades. A middleman reduces transaction costs. |
| Property rights | The rights to use, control, and obtain the benefits from a good or resource. |
| Private-property rights | Property rights that are exclusively held by an owner and protected against invasion by others. Private property can be transferred, sold, or mortgaged at the owner’s discretion |
| Private-property rights involve three things (1-2) | 1. the right to exclusive use of the property control, and use of the property, including the right to exclude others); 2. legal protection against invasion from other individuals who would seek to use or abuse the property without the owner’s permiss |
| Private-property rights involve three things (3) | 3. the right to transfer, sell, exchange, or mortgage the property. |
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