IntroMicroExam1!
Terms
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- Economics
- The study of how people use their scarce resources to satisfy their unlimited wants
- Resources
- The inputs, or factors of production, used to produce the goods and services that people want; consist of land, labor, capital, entrepeneurship
- labor
- the physical and mental effort used to produce goods and services
- capital
- the buildings, equipment, and human skills used to produce goods & services
- natural resources
- All gifts of nature used to produce goods and services; includes renewable & exhaustible _______
- entrepreneurial ability
- the imagination required to develop a new product or process, the skill needed to organize production, and the willingness to take the risk of profit or loss
- entrepreneur
- a profit-seeking decision maker who starts an idea, organizes an enterprise to bring that idea to life, and assumes the risk of the operation
- wages
- payment to resource owners for their labor
- interest
- Payment to resource owners for the use of their capital
- rent
- payment to resource owners for the use of their natural resources
- profit
- reward for entrepreneurial ability; sales revenue-resource cost
- good
- a tangible product to satisfy human wants
- service
- an activity, or intangible product, used to satisfy human wants
- scarcity
- occurs when the amount people desire exceeds the amount available at a 0 price
- market
- a set of arrangements by which buyers and sellers carry out exchange at mutually agreeable terms
- product market
- a market in which a good or service is bought or sold
- resource market
- a market in which a resource is bought or sold
- circular-flow model
- a diagram that traces the flow of resources, products, income, and revenue among economic decision makers
- rational self-interest
- each individual tries to maximize the expected benefit achieved with a given cost or to minimize the expected cost of achieving a given benefit
- marginal
- incremental, additional, or extra; used to describe a change in an economic variable
- microeconomics
- the study of the economic behavior in particular markets, such as that for computers or unskilled labor
- macroeconomics
- the study of economic behavior of entire economies, as measured, for example, by total production and employment
- economic fluctuations
- the rise and fall of economic activity relative to the long-term growth trend of the economy; also called the business cycle
- economic theory/ economic model
- a simplification of reality used to make predictions about cause and effect in the real world
- variable
- a measure, such as price or quantity, that can take on different values at different times
- other-things-constant assumption
- The assumption, when focusing on the relation among key economic variables, that other variables remain unchanged; in Latin 'ceteris paribus'
- behavioral assumption
- An assumption that describes the expected behavior of economic decision makers-what motivates them
- hypothesis
- a theory about how key variables relate
- positive economic statement
- A statement that can be proved or disproved by reference to facts
- normative economic statement
- a statement that reflects an opinion, which cannot be proved or disproved by reference to the facts
- association is causation fallacy
- the incorrect idea that if two variables are associated in time, one must necessarily cause the other
- fallacy of composition
- the incorrect belief that what is true for the individual, or part, must necessarily be true for the group, or the whole
- secondary effects
- unintended consequences of economic actions that may develop slowly over time as people react to events
- positive relation (direct relation)
- occurs when two variables increase or decrease together; the two variables move in the same direction
- negative relation (inverse relation)
- occurs when two variables move in opposite directions; when one increases, the other one decreases
- slope of line
- a measure of how much the vertical variable changes for a given increase in the horizontal variable; the vertical change between two points divided by the horizontal increase
- tangent
- a straight line that touches a curve at a point but does not cut or cross the curve; used to measure the slope of a curve at a point