Chapter 1: What is Economics Flashcards
Benefit
benefit of something is the gain or pleasure that it brings and is determined by preferences.
Capital
tools, equipment, buildings, and other constructions that businesses use to produce goods and services.
Economic Model
description of some aspect of the economic world that includes only those features of the world that are needed for the purpose at hand.
Economics
social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices.
Efficient
resource use is efficient if it is not possible to make someone better off without making someone else worse off.
Entrepreneurship
human resource that organizes the other three factors of production: labour, land, and capital.
Factors of Production
productive resources used to produce goods and services.
Goods and Services
objects that people value and produce to satisfy human wants.
Human Capital
knowledge and skill that people obtain from education, on-the-job training, and work experience.
Incentive
reward that encourages an action or a penalty that discourages one.
Interest
income that capital earns.
Labour
work time and work effort that people devote to producing goods and services.
Land
“gifts of nature” that we use to produce goods and services.
Macroeconomics
study of the performance of the national economy and the global economy.
Margin
when a choice is made by comparing a little more of something with its cost, the choice is made at the margin.
Marginal Benefit
benefit that a person receives from consuming one more unit of a good or service. It is measured as the maximum amount that a person is willing to pay for one more unit of the good or service.
Marginal Cost
opportunity cost of producing one more unit of a good or service. It is the best alternative forgone. It is calculated as the increase in total cost divided by the increase in output.
Microeconomics
study of the choices that individuals and businesses make, the way these choices interact in markets, and the influence of governments.
Opportunity Cost
highest-valued alternative that we must give up to get something.
Preferences
description of a person’s likes and dislikes and the intensity of those feelings.
Profit
income earned by entrepreneurship.
Rational Choice
choice that compares costs and benefits and achieves the greatest benefit over cost for the person making the choice.
Rent
income that land earns.
Scarcity
our inability to satisfy all our wants.
Self-interest
choices that you think are the best ones available for you are choices made in your self-interest.
Social Interest
choices that are the best ones for society as a whole.
Trade-off
constraint that involves giving up one thing to get something else.
Wages
income that labour earns.
