Chapter 1 and 2 Vocabulary Flashcards
Economics
The study of how people make choices given the condition of scarcity
What type of science is economics/
A social science
Economic Policy
how institutions, governments, and businesses influence the choices people make
Cost-Benefit analysis
Consider additional costs and additional benefits of an action when making a decision
What does economics assume people are?
Rational
Opportunity cost
value of your best alternative sacrificed when making a decision.
Two qualities of actors
- Self interested. 2. Responsive of incentives.
Microeconomics
individual households, businesses, and industries
Macroeconomics
Recessions, inflation, and employment
Model building
Using models to simplify and explain economic relationships.
Ceteris Paribus
Holding all other variables constant
Law of demand
when price increases, people will buy less
Correlation
Two things happen at the same time, caused by a third party
Causation
Two things happen because of each other
Efficiency
how well resources are allocated
Allocative efficiency
The person who wants the good most will get.
Equity
Issues of fairness
Positive statement
Based on a fact
Normative statement
based on an assertion
Thinking at the margin
ignoring costs already incurred
Going to a second movie for free after paying for the first one means the opportunity cost is?
Zero dollars
