36 terms

Economics Chapter 1

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Terms in this set (...)

Scarcity
When the economic resources needed to make goods and services are in limited supply
Opportunity Costs
To obtain more of one thing, society forgoes the opportunity of getting the next best thing
Utility
The pleasure or satisfaction from consuming a good or service
Marginal Analysis
Comparisons of marginal benefits and marginal costs for decision making
Scientific Method
Based on observations, creating a hypothesis , testing that hypothesis and comparing it with other outcomes, and modifying it if necessary.
Economic Principle
A widely accepted and well-tested economic theory that is a statement about economic behavior or the economy that enables the prediction of the effects of certain actions
Generalizations
Economic principles are this because they try to encompass the average workforce/business
Other-things-equal-assumption/ Ceteris paribus
An assumption economists use that says factors other than the ones they are focusing on do not change
Micro-economics
The study of economics as it pertains to individual consumers, houses or businesses
Macro-economics
Examines the economy as a whole
Aggregate
A collection of specific economic units treated as one
Economizing Problem
The need to make choices because economic wants outweigh economic means
Land
Natural Resources used in producing a good or service
Labor
The physical work that is being done to produce a good or service
Capital
Manufacturing aids used to produce goods and services
Investment
Spending that pays for the production and accumulation of capital goods
Entrepreneurial Ability
The ability to combine resources and start producing goods and services and developing a business
Production Possibilities Curve
A curve that shows you how much of two different goods you can produce with limited resources
Law of Increasing Opportunity Cost
As the production of a certain good increases, the opportunity cost of producing and additional unit rises
Advances in Technology
Allows society to produce more goods using less economic resources
International Specialization/Trade
Allows a country to get more of a desired good at a less sacrifice to some other good
normative statement
economic statements that involve value judgement
Monetary policy
manipulation of the money supply, credit and interest rates by the central bank
Fiscal policy
federal spending and taxation
Economics
a social science concerned with making optimal choices under conditions of scarcity
positive economics
economic statements that are factual
Budget Line
illustrates the greatest combination of two items someone can buy with their income
Capital good
A good employed to increase production
Consumer good
Not capital good, anything used by consumers
Fallacy of composition
assuming that when something benefits one person it benefits another
post hoc fallacy
cant prove some reasons
correlation not causation
correlation doesn't mean causation
independent variable
changes first, on horizontal line
dependent variable
changes in response to first, is on vertical line
Economic models and principles are highly useful in
determining cause and effect; understanding how the economy operates, explaining and predicting, analyzing economic behavior
Are consumer goods or capital goods more indicative of the future growth rate
Capital goods
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