Microeconomics Flashcards
what is microeconomics
-A part of economics that looks at the behaviors of decision-takers in an economy
-The study of what’s likely to happen when individuals make choices
Who are the decision-makers in an economy
-Individuals
-Households
-Firms
What influences the decisions of the decision-makers in an economy
-Incentives
-Prices
-Resources
-Methods of production
Who are the individuals in an economy
-Buyers
-Sellers
-Business owners
What is the role of the individuals in an economy
-They create the supply and demand for resources by using money and interest rates as a pricing mechanism
What is positive microeconomics
-Describes economic behaviors and explains what to expect if certain conditions change
What is normative microeconomics
-Positive microeconomics is applied normatively to prescribe what (people, businesses, and governments) should do in order to obtain the best value out of everything
What is utilitarianism
-A theory of morality that advocates actions that foster happiness and opposes actions that cause unhappiness
What are incentives and behaviors
-How people react to a situation in which they are confronted
What is the utility theory
-Consumers will choose to buy a combination of goods that will maximize their happiness.
-The goods that they buy depend on how much money a person earns
What is the production theory
-The study of the process in which inputs are turned into outputs
-Producers seek the most economic steps to do this in order to maximize profits
What is the price theory
-Utility and production theory interact with each other to produce the theory of supply and demand.
-This determines the prices in a competitive market
