ECON chap1

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Terms in this set (43)
ProfitReward for entrepreneurial ability; sales revenue minus resource cost.GoodA tangible product used to satisfy human wants.ServiceAn activity, or intangible product, used to satisfy human wants.ScarcityOccurs when the amount people desire exceeds the amount available at a zero price.MarketA set arrangement by which buyers and sellers carry out exchange at mutually agreeable terms.Product MarketA market in which a good or service is bought and sold.Resource MarketA market in which a resource is bought and sold.Circular-flow modelA diagram that traces the flow of resources, products, income, and revenue among economic decision makers.Rational Self-interestEach individual tries to maximize the expected benefits achieved with a given cost or to minimize the expected cost of achieve a given benefit.MarginalIncremental, additional, or extra; used to described a change in an economic variable.MicroeconomicsThe study of the economic behavior in particular markets, such as that computers or unskilled labor.MacroeconomicsThe study of the economic behavior of entire economics, as measured, for example, by total production and employment.Economic Fluctuationshe rise and fall of economic activity relative to the long-term growth trend of the economy; also called business cycles.Economic theory, or economic modelA simplification of reality used to make predictions about cause and effect in the real world.VariableA measure, such as price or quantity, that can take on different values at different times.Other-things-constant assumptionThe assumption, when focusing on the relation among key economic variables, that other variables remain unchanged; in latin, ceteris paribus.Behavioral assumptionAn assumption that describes the expected behavior of economic decision makers, what motivates them.HypothesisA theory about how key variables relate.Positive economic statementA statement that can reproved or disproved by reference to facts.Normative economic statementA statement that reflects an opinion, which cannot be proved or disproved by reference to the facts.Association-is-causation fallacyThe incorrect idea that if two variables are associated in time, one must necessarily cause the other.Fallacy of compositionThe incorrect belief that what is true for individual, or part, must necessarily be true for the group, or the whole.Secondary effectsUnintended consequences of economic actions that may develop slowly over time as people react to events.OriginOn a graph depicting two-dimensional space, the zero point.Horizontal axisLine on a graph that begins at the origin and goes to the right and left; sometimes called the X axis.Vertical axisLine on a graph that begins at the origin and goes up and down; sometimes called the Y axis.GraphA picture showing how variables relate in two-dimensional space; one variable is measured along the horizontal axis and the other along the vertical axis.Dependable variablea variable whose value depends on that of the independent variable.Independent variablea variable whose value determines that of the dependent variable.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 decreases.Shape of a lineA 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.TangentA 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.