Microeconomics Chapter 1

A state of the economy in which production is in accordance with consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal befit to society equal to the marginal cost of producing it.

An economy in which the government decides how economic resources will be allocated.

A simplified version of reality used to analyze real-world economic situations.

Something measurable that can have different values, such as the incomes of doctors.

Analysis that involves comparing marginal benefits and marginal costs.

An economy in which the decisions of households and firms interacting in markets allocate economic resources.

An economy in which most economic decisions result form the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.

Analysis concerned with what ought to be.

The highest-valued alternative that must be given up to engage in an activity.

Analysis concerned with what is.

A situation in which a good or service is produced at the lowest possible cost.

The idea that, because of scarcity, producing more of one good or service means producing less of another good or service.

A situation that occurs in markets when both the buyer and the seller of a product are made better off by the transaction.