Unit 1: Introduction to Economics and Microeconomics Vocab Flashcards
Microeconomics
- focuses on individual decision-making units and how they interact
Macroeconomics
- explores the economy as a whole
Scarcity
- the fixed amount of goods or services available
Traditional economy
- an economic system in which traditions, customs, and beliefs help shape the goods and services the economy produces, as well as the rule and manner of their distribution also referred to as a subsistence economy, a traditional economy is defined by bartering and trading
- a system that relies on customs, history, and time-honored beliefs.
Command economy
- an economic system in which the means of production are publicly owned and economic activity is directed by a central government or portion of the government
- an economic system in which activity is controlled by a central authority and the means of production are publicly owned.
Market economy
- an economic system in which the forces of supply and demand determine what goods and services are produced
- an economic system where two forces, known as supply and demand, direct the production of goods and services.
Mixed economy
- an economy that practiced characteristics of both command and market economies; supply and demand largely influence the economy, but there is government intervention to meet certain economic goals
Opportunity cost
- the cost of choosing; what you give up by choosing one option
- the loss of potential gain from other alternatives when one alternative is chosen.
Goods
- objects that can fulfill human wants/needs, provide utility
Services
- economic activity that is intangible; provides utility, but cannot be stored
Endowment
- natural and human resources from which all goods and services must be produced
Utility
- satisfaction; economists assume maximizing this drives individual choice; measured in utils
- the total satisfaction or benefit from consuming a good or service.
Profit motive
- the tendency of people to engage in activities that will lead to monetary gain
Consumer sovereignty
- the economic power of the individual in a free market
- the economic concept that the consumer has some controlling power over goods that are produced, and the idea that the consumer is the best judge of their own welfare.
Government Regulation
- requirements the government places on private firms and individuals to achieve the government’s goals
Social & economic goals
- Freedom
- Security
- Equity
- Growth
- Efficiency
- Stability
Marginal utility
- additional increment of utility associated with consuming one more unit of a good or service
- the added satisfaction that a consumer gets from having one more unit of a good or service. The concept of marginal utility is used by economists to determine how much of an item consumers are willing to purchase.
Margin
- in a succession of units, the specific unit you are focusing on
Total utility
the total satisfaction derived from consuming a specific quantity of a good or service; the total of marginal utilities for all individual units consumed
Satiate
satisfy
Initial decision
over-simplified decision-making process based on utility (consume until marginal utility =0)
Bliss point
maximization of utility
Marginal analysis
evaluating the impact of one additional unit
Util
a measure of utility (this is an abstract concept)
Diminishing marginal productivity
initially, one input increases the initial successive units of input toward the output, but eventually this will add to less output
Balancing at the margin
maximizing utility in light of scarcity
Discounting the future
utility diminishes the further in the future that utility is realized
