P2 Economy Flashcards
Def Scarcity
Scarcity : the problem that our resources limit us
Define Consumption
Act of using goods and services to satisfy wants
Define Production
Act of making goods and services
Define budget constraint
The limit on the consumption bundles what a consumer can affords
Define Marginal cost
Extra cost of producing an additional unit
Define marginal revenue
The change in the total revenue when an additional unit is sold
Define marginal utility
Measures the extra utility (or satisfaction) from consuming an additional unit of a product
Define opportunity cost
Measures the sacrifice given up in the next best alternative
Difference microeconomics and macroeconomics
Macro > micro
- Microeconomics => individual decisions of households and firms
- Macroeconomics : analyses the economy as a whole (inflation, unemployment…)
Difference between positive economics and normative economics
Positive economics : examines the different relationships between economic variables and provides an analysis to the variables that can actually be tested
Normative economics : focuses on value judgements about what you think should happen
