m1 Flashcards
three key ideas that lie at the heart of the economic approach to understanding human behavior
optimization, equilibrium, empiricism
economic agent
an individual or a group that makes choices
scarce response
where the quantity that people want exceeds the quantity that is available e.g. everything
scarcity
is the situation of having unlimited wants in a world of limited resources
economics
the study of how agents choose to allocate scarce resources and how those choices affect society
positive economics
is analysis that generates objective descriptions or predictions, which can be verified with data
normative economics
analysis that recommends what an individual or society ought to do
economic agents examples, individual and plural
singular- consumer,boss, parent, theif
pluarl- family, political party, firm
microeconomics
the study of how individuals, households, firms, and government make choices, and how those choices affect prices, the allocation of resources, and the well being of other agents
macroeconomics
the study of the economy as a whole, economy wide phenomena
factors of production
land labor capital and entrepreneurship
mixed economy
a system with free markets but also some government intervention
absolute advantage
the producer that can produce the most output or requires the least amount of inputs
comparative advantage
the producer with the lowest opportunity cost
