Chapter 1 Flashcards
Microeconomics
The study of the choices that individuals and businesses make, the way these choices interact in markets, and the influence of government.
Macroeconomics
The study of the performance of the national economy and the global economy.
Goods and services
ARE the objects that people value and produce to satisfy wants.
Factors of production
The resources used to produce goods and services
Four factors of production
Land
Labour
Capital
Entrepreneurship
Land
The gifts of nature that we use to produce goods and services are called land
Labor
The work time and work effort that people devote to producing goods and services
Human capital
The knowledge and skill that people obtain from education, on-the-job training and work experience.
Capital
The tools, instruments, machines, buildings and other constructions that businesses use to produce goods and services.
Entrepreneurship
The human resource that organizes labor, land and capital.
Tradoff
An exchange: giving up one thing to get something else.
Rational choice
One that compares costs and benefits and achieves the greatest benefit over cost for the person making the choice.
Benefit
The gain or pleasure that it brings and is determined by preferences
Opportunity cost
The highest-valued alternative that must be given up to get it.
Marginal benefit
The benefit that arises from an increase in an activity
Marginal cost
The opportunity cost of an increase in an activity
Positive statements
A statement about what is.
Normative statements
A statement about what ought to be.
Economic model
A description of some aspect of the economic world that includes only those features that are needed for the purpose at hand.
Definition of economics
The social science that studies the choices that people make as they cope with scarcity.
All economics arise from…
scarcity - from the fact that wants exceed the resources available to satisfy them
