Chapter 1 and 2 Vocabulary

Question 1

Economics

Answer 1

The study of how people make choices given the condition of scarcity

Question 2

What type of science is economics/

Answer 2

A social science

Question 3

Economic Policy

Answer 3

how institutions, governments, and businesses influence the choices people make

Question 4

Cost-Benefit analysis

Answer 4

Consider additional costs and additional benefits of an action when making a decision

Question 5

What does economics assume people are?

Answer 5

Rational

Question 6

Opportunity cost

Answer 6

value of your best alternative sacrificed when making a decision.

Question 7

Two qualities of actors

Answer 7

1. Self interested. 2. Responsive of incentives.

Question 8

Microeconomics

Answer 8

individual households, businesses, and industries

Question 9

Macroeconomics

Answer 9

Recessions, inflation, and employment

Question 10

Model building

Answer 10

Using models to simplify and explain economic relationships.

Question 11

Ceteris Paribus

Answer 11

Holding all other variables constant

Question 12

Law of demand

Answer 12

when price increases, people will buy less

Question 13

Correlation

Answer 13

Two things happen at the same time, caused by a third party

Question 14

Causation

Answer 14

Two things happen because of each other

Question 15

Efficiency

Answer 15

how well resources are allocated

Question 16

Allocative efficiency

Answer 16

The person who wants the good most will get.

Question 17

Equity

Answer 17

Issues of fairness

Question 18

Positive statement

Answer 18

Based on a fact

Question 19

Normative statement

Answer 19

based on an assertion

Question 20

Thinking at the margin

Answer 20

ignoring costs already incurred

Question 21

Going to a second movie for free after paying for the first one means the opportunity cost is?

Answer 21

Zero dollars