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MicroEco Ch. 1
Microeconomics Chapter 1 Limits, Alternatives, and Choices
| Term | Definition |
|---|---|
| Economics | The social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity. |
| Economic Perspective | Economic way of thinking. |
| Opportunity Costs | To obtain more of one thing, society forgoes the opportunity of getting the next best thing. |
| Utility | The pleasure, happiness, or satisfaction obtained from consuming a good or service. |
| Purposeful behavior | People make decisions with some desired outcome in mind. |
| Marginal Analysis | Comparisons of magical benefits and marginal costs, usually for decision making |
| Scientific Method | Observing Hypothesis Testing Accepting, rejecting, & modifying hypothesis Continue to test hypothesis |
| Economic Principle | A statement about economic behavior or the economy that enables prediction of the probable effects of creation actions. |
| Generalizations | Economic principles are generalizations relating to economic behavior or to the economy itself |
| Other-things-equal Assumption | The assumption that factors other than those being considered do not change. |
| Microeconomics | Economics concerned with decision making by individual customers, workers, households, and business firms. EX. examine the sand, rocks, and shells, not the beach |
| Macroeconomics | Examines either the economy as a whole or its basic subdivisions or aggregates, such as the government, household, and business sectors. Looks at total picture, not specific details |
| Aggregate | A collection of specific economic units treated as if they were one unit. EX. Lump together the millions of consumers in the U.S. economy and treat them as one huge unit called "consumers" |
| Normative Economics | Incorporates value judgements about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal. Embodies "what it ought to be" |
| Positive Economics | Focuses on face and cause-and-effect relationships Embodies "what is" |
| Economizing Problem | The need to make choices because economic wants exceed economic means |
| Budget Line | Schedule or curve that shows various combinations of two products a consumer can purchase with a specific money income |
| Unattainable | Combinations beyond the budget line |
| Economic Resources | All natural, human, and manufactured resources that go into the production of goods and services |
| Land | Includes all natural resources, "gifts of land" used in the production process EX. Forests, mineral and oil deposits, water resources, wind power, sunlight |
| Labor | Consists of the physical actions and mental activities that people contribute to the production of goods and services EX. Work-related activities of logger, machinist, teacher |
| Capital | Includes all manufactured aids used in producing consumer goods and services. EX. Factory, storage, transportation |
| Investment | Spending that pays for the production and accumulation of capital goods. |
| Consumer Goods | Satisfies wants directly |
| Capital Goods | Satisfy indirectly by aiding the production of consumer goods. EX. Commercial baking ovens aid making loaves of bread. |
| Entrepreneurial Ability | Entrepreneur preforms several social useful functions: -Initiative in combining resource of land, labor, capital to produce a good/service -Makes strategic business decisions -Innovates -Bears Risk |
| Factors of Production | Land. labor, capital, and entrepreneurial ability combined to produce goods and services. "Inputs" |
| Full Employment | Economy is employing all of its available resources |
| Fixed Resources | The quantity and quality of the factors of production are fixed |
| Fixed Technology | The state of technology is constant |
| Two Goods | The economy is producing only two goods |
| Production Possibilities Curve | Graphic curve that displays the different combinations of goods and services that society can produce in a fully employed economy |
| Law of Increasing Opportunity Costs | As the production of a particular good increase, the opportunity cost of producing an additional unit rises. |
| MB = MC | Where the optimal amount of the activity occurs. |
| Economic Growth | Larger total output |
Created by:
ginganinjaem
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