Principles of Microeconomics: Chapter 1

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Principles of Microeconomics: Chapter 1
2013-06-03 17:06:30
Microeconomics economics scarcity economy business finance

Useful vocabulary terms for economics (Chapter 1)
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  1. All economic questions and problems arise because?
    Human wants exceed the resources available to satisfy them.
  2. Scarcity
    Scarcity is the condition that arises because wants exceeds the ability of resources to satisfy them.
  3. Economics
    • Economics is the social science that studies
    • the choices that individuals, businesses, governments, and entire societies
    • make as they cope with scarcity, the incentives that influence those choices, and
    • the arrangements that coordinate them.
  4. Microeconomics
    • The study of the choices that individuals
    • and businesses make and the way these choices interact and are influenced by
    • governments.
  5. Macroeconomics
    • The study of the aggregate (or total)
    • effects on the national economy and the global economy of the choices that
    • individuals, businesses, and governments make.
  6. self-interest
    • The choices that are best for the
    • individual who makes them
  7. social interest
    • The choices that are best for
    • society as a whole
  8. Globalization
    • expansion
    • of international trade and the production of components and services by firms
    • in other countries
  9. Rational Choice
    A choice that uses the available resources to best achieve the objective of the person making the choice.
  10. Benefit
    The gain or pleasure that something brings.

    Benefit is measured by what you are willing to give up.
  11. Opportunity cost
    The best thing that you must give up to get something—the highest-valued alternative forgone.
  12. Choosing at the Margin
    A choice made at the margin is a choice made by comparing all the relevant alternatives systematically and incrementally.
  13. Marginal cost
    is the opportunity cost of a one-unit increase in an activity.

    The marginal cost of something is what you must give up to get one additional unit of it.
  14. Marginal benefit
    is the what you gain when you get one more unit of something.

    • The marginal benefit of something is measured
    • by what you are willing to give up to get one
    • additional unit of it.
  15. Incentive
    An incentive is a reward or a penalty—a “carrot” or a “stick”—that encourages or discourages an action.
  16. Correlation
    The tendency for the values of two variables to move together in a predictable and related way.
  17. Normative statements
    Disagreements that can’t be settled by facts are normative statements—statements about what ought to be.
  18. Positive statements
    Disagreements that can be settled by facts are positive statements—statements about what is.