# Chapter 1: Thinking Like an Economist

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1. the study of how people make choices under conditions of scarcity and of the results of those choices for society.
Economics
2. someone with well defined goals who tries to fulfill those goals as best he or she can.
Rational Person
3. the economic surplus from taking any action is the benefit of taking that action minus its cost.
Economic Surplus
4. the opportunity cost of an activity is the value of what must be forgone in order to undertake the activity.
Opportunity Cost
5. a cost that is beyond recovery at the moment of decision must be made.
Sunk Cost
6. the increase in total cost that results from carrying out one additional unit of an activity.
Marginal Cost
7. the increase in total benefit that results from carrying out one additional unit of an activity.
Marginal Benefit
8. the total cost of undertaking n units of an activity divided by n.
Average Cost
9. the total benefit of undertaking units of an activity divided by n.
Average Benefit
10. one that sayd how people should behave.
Normative Economic Principle
11. one that predicts how people will behave.
Positive Economic Principle
12. the study of individual choice under scarcity and its implications for the behavior of prices and quantities in individual markets.
Microeconomics
13. the study of the preformance of national economies performance of national economies and the policies that governments use to try to improve that performance.
Macroeconomics
14. a mathematical expression that describes the relationship between two or more variables.
Equation
15. a quantity that is free to take a range of different values.
Variable
16. a variable in an quation whose value is determined by the value taken by another varible in the equation.
Dependent Variable
17. a variable in an equation whose value determines the value taken by another varible in the equation.
Independent Variable
18. a quantity that is fixed in value.
Constant (or Parameter)
19. in a straight line, the value taken by the dependent variable when the independent variable equals zero.
Vertical Intercept
20. in a straight line, the ratio of the vertical distance the straight line travels between any two points (rise) to the corresponding horizontal distance (run).
Slope
21. although we have boundless needs and wants, the resources available to us are limited so having more of one good thing usually means having less of another.
The Scarcity Principle (also called the No - Free - Lunch Principle)
22. an individual (or a firn or a society) should take an action if, and only if, the extra benefits from taking the action are at least as great as the extra costs.
The Cost - Benefit Principle
23. a person (or a firm or a society) is more likely to take an action if its benefit rises, and less likely to take it if its cost rises, inshort, incentives matter.
The Incentive Principle
 Author: AmandaWelsh ID: 168874 Card Set: Chapter 1: Thinking Like an Economist Updated: 2012-09-04 15:19:21 Tags: Economics Chapter Folders: Description: Chapter 1 Economics Vocab Show Answers: