Ch. 1 Vocab Flashcards
Economics
The study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society
Scarcity
The goods available are too few to satisfy the individuals’ desires
Microeconomics
Study of individual choice and how that choice is influenced by economic forces
Macroeconomics
The study of the economy as a whole
Marginal costs
The additional cost to you over the costs you have already incurred
Sunk costs
Costs that have already been incurred and cannot be recovered
Marginal benefit
The additional benefit above what you’ve already derived
Economic decision rule
If the marginal benefits of doing something exceed the marginal costs, do that thing.
If the marginal costs of doing something exceed the marginal benefits, don’t do that thing
Opportunity cost
The benefit that you might have gained from choosing the next best alternative
Economic forces
The necessary reactions to scarcity
Invisible hand
The price mechanism, the rise and fall of prices that guides our actions in a market
Economic model
A framework that places the generalized insights of the theory into a more specific contextual setting
Economic principle
A commonly held economic insight stated as a law or principle
Experimental economics
A branch of economics that studies the economy through controlled laboratory experiments
Natural experiments
Naturally occurring events that approximate a controlled experiment where something has changed in one place, but has not changed somewhere else
