Chapter One Flashcards
economics:
the discipline that studies how efficient decisions are made
efficient decisions:
choosing the most valuable alternative
theory of revealed preference
choices reveal our values
characteristics of value:
value depends on the situation
value is different for different people
subsequent units on the same good have less value
value of something to an individual
the most that individual is willing to sacrifice to obtain that something OR (if the individual owns something) the least the individual is willing to accept in exchange for that something
cost:
the value of the best alternative which is sacrificed when a decision is made
no free lunch:
free means no cost for anyone and nothing can be free because each decision has a least 2 alternatives
macroeconomics:
the study of entire economies, using concepts like total output, the unemployment rate, the national debt, total investment
scarcity:
when we want more than resources can satisfy
marginal value:
the value of the individual units of that something
-the 21st gal of gas used
marginal analysis
we consume each unit of which the marginal value is at least as great as marginal cost
law of diminishing return
as we add workers to a production facility, eventually they become less productive because there is no way for everyone to take part in the production process
demand
the relationship between he possible prices of something and the quantities people are willing to but, all things being equal
supply
the relationship between the possible prices of something and quantities that people or firms are willing and ale to sell, other things being equal
equilibrium price
consumers can buy all they want an firms can sell all they want
