27 terms

Microeconomics (Limits, Alternatives, and Choices)

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Economics
the study of how people seek to satisfy their needs and wants by making choices
Economics Perspective
A viewpoint that envisions individuals and institutions making rational decisions by comparing the marginal benefits costs associated with their actions.
Opportunity cost
the amount of other products that must be forgone or sacrificed to produce a unit of a product.
Utility
the want-satisfying power of a good or service; the satisfaction or pleasure a consumer obtains from the consumption of a good or service (or from the consumption of a collection of goods and services).
Marginal Analysis
the comparison of marginal ("extra" or "additional") benefits and marginal costs, usually for decision making
Scientific Method
The procedure for the systematic pursuit of knowledge involving the observation of facts and the formulation and testing of hypotheses to obtain theories, principles, and laws.
Economic Principle
a widely accepted generalization about the economic behavior of individuals or institutions.
Other-things-equal Assumption
the assumption that factors other than those being considered are held constant; ceteris paribus assumption
Microeconomics
The part of economics concerned with decision making by individual units such as a household, a firm, or an industry and with individual markets, specific goods and services, and product and resource prices.
Macroeconomics
The part of economics concerned with the economy as a whole; with such major aggregates as the household, business, and government sectors; and with measures of the total economy.
Aggregate
a collection of people who happen to be in the same place at the same time but share little else in common
Positive Economics
the analysis of facts or data to establish scientific generalizations about economic behavior
Normative Economics
the part of economics involving value judgments about what the economy should be like; focused on which economic goals and policies should be implemented; policy economics
Economizing Problem
the choices necessitated because society's economic wants for goods and services are unlimited but the resources available to satisfy these wants are limited (scarce)
Budget Line
A line that shows the different combinations of two products a consumer can purchase with a specific money income, given the products' prices
Economic Resources
the land, labor, capital, and entrepreneurial ability that are used in the production of goods and services; productive agents; factors of production
Land
all natural resources used to produce goods and services
Labor
people's physical and mental talents and efforts that are used to help produce goods and services
Capital
human-made resources (buildings, machinery, and equipment) used to produce goods and services; goods that do not directly satisfy human wants; also called capital goods.
Investment
spending for the production and accumulation of capital and additions to inventories.
Entrepreneurial Ability
the human resource that combines the other resources to produce a product, makes nonroutine decisions, innovates, and bears risks.
Factors of Production
economic resources: land, capital, labor, and entrepreneurial ability
Consumer Goods
products and services that satisfy human wants directly
Capital Goods
human-made resources (buildings, machinery, and equipment) used to produce goods and services; goods that do not directly satisfy human wants; also called capital goods.
Production Possibilites Curve
-A curve showing the different combinations of two goods or services that can be produced in a full-employment, full production economy where all the available supplies of resources and technology are fixed.
Law of Increasing Opportunity Costs
The principle that as the production of a good increases, the opportunity cost of producing an additional unit rises.
Economic Growth
an outward shift in the production possibilities curve that results from an increase in resource supplies or quality or an improvement in technology.