Econ 105 Chapter 1
Terms
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- Scarcity
- The situation in which unlimited wants exceed the limited resources available to fulfill those wants.
- Economics
- The study of the choices people make to attain their goals, given their scarce resources.
- Economic Model
- Simplified versions of reality used to analyze real-world economic situations.
- Market
- A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade.
- Marginal Analysis
- Analysis that involves comparing marginal benefits and marginal costs.
- Trade-Off
- The idea that because of scarcity, producing more of one good or service means producing less of another good or service.
- Centrally Planned Economy
- An economy in which the government decides how economic resources will be allocated.
- Market Economy
- An economy in which the decisions of households and firms interacting in markets allocate economic resources.
- Mixed Economy
- An economy in which most economic decisions result from the interaction of buyers and sellers in market, but in which the government plays a significant role in the allocation of resources.
- Productive Efficiency
- The situation in which a good or service is produced at the lowest possible cost.
- Allocative Efficiency
- A state of the economy in which production reflects consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it.
- Voluntary Exchange
- The situation that occurs in markets when both the buyer and seller of a product are made better off by the transaction.
- Equity
- The fair distribution of economic benefits.
- Economic Variable
- Something measurable that can have different values, such as the wages of software programmers.
- Positive Analysis
- Analysis concerned with what is.
- Normative Analysis
- Analysis concerned with what ought to be.
- Microeconomics
- The study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices.
- Macroeconomics
- The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth.