Chapter 2: Micro Flashcards
Capitalism
An economic system based on a market economy in which capital is individually owned, and production and employment decisions are decentralised
Ceteris Paribus
“all other things being equal” refers to holding all other variable constant or keeping all other things the same when one variable is changed
Controlled experiments
Empirical tests of theories in a controlled setting in which particular effects can be isolated
Economic model
An explanation of how the economy or part of the economy works
Economic variable
Any economic measure that can vary over a range of values
Experimental economics
A branch of economics that uses laboratory experiments to analyse economic behaviour
Gross domestic product
A measure of the value of all the goods and services newly produced in an economy during a specified period of time
Macroeconomics
The branch of economics that examines the workings and problems of the economy as a whole- GDP growth and unemployment
Microeconomics
The branch of economics that examines individual decision making at firms and households and the way they interact in specific industries and markets
Mixed economies
A market economy in which the government plays a very large role
Negatively related
A situation in which an increase in one variable is associated with a decrease in another variable; also called inversely related
Normative economics
Economic analysis that makes recommendations about economic policy
Positive economics
Economic analysis that explains what happens in the economy and why, without making recommendations about economic policy
Positively related
A situation in which an increase in one variable is associated with an increase in another variable; also called directly related
Socialism
An economic system in which the government owns and controls all the capital and makes decisions about prices and quantities as part of a central plan
