Glossary of Chapter I

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marginal cost
the additional cost to you over and above the costs you have already incurred
sunk cost
costs that have already been incurred and cannot be recovered
margincal benefit
additional benefit above what you've already derived
economic decision rule
1) If the marginal benefits of doing something exceed the marginal costs, do it.
2) If the marginal costs of doing something exceed the marginal benefits, don't do it.
opportunity cost
the benefit foregone by undertaking an activity
economic forces
the necessary reactions to scarcity
market force
an economic force that is given relatively free rein by society to work through the market (ex. changing prices)
invisible hand
the price mechanism, the rise and fall of prices that guides our actions in a market
achieving a goal as cheaply as possible
invisible hand theory
a market economy, through the price mechanism, will tend to allocate resources efficiently
economic policies
action (or inaction) taken by government to influence economic actions
positive economics
the study of what is, and how the economy works
normative economis
the study of what the goals of the economy should be
art of economis
the application of the knowledge learned in positive economics to the achievement of the goals one has determined in normative economics

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