Chapter 1 - Limits, Alternatives, and Choices Flashcards
Economics
The social science concerned with how individuals, institutions, and society make optimal (best) choices under conditions of scarcity
Economic Perspective
A viewpoint that envisions individuals and institutions making rational decisions by comparing the marginal benefits and marginal costs associated with their actions
Opportunity Cost
The amount of other products that must be forgone or sacrificed in order to produce a unit of a product
Utility
The satisfaction a person gets from consuming a good or service
Marginal Analysis
The comparison of marginal (“extra” or “additional) benefits and marginal costs, usually for decision making
Scientific Method
The systematic pursuit of knowledge through observing a problem, collecting data, and formulating and testing hypotheses to obtain theories, principles, and laws
Economic Principle
A statement about economic behavior or the economy that makes it possible to predict the probable effects of certain actions
Generalizations
Statements of the nature of the relation between two or more sets of facts
Other-things-equal assumption
The factors that factors other than those are being considered are held constant
Economic Model
A simplified picture of economic reality; an abstract generalization
Microeconomics
The part of economics concerned with such individual units as industries, firms, and households
Macroeconomics
The part of economics concerned with the economy as a whole
Aggregate
A collection of specific economic units treated as a if they were one unit
Positive Economics
The analysis of facts to establish cause-and-effect relationships
Normative Economics
The part of economics involving value judgments about what the economy should be like
