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16 Cards in this Set
- Front
- Back
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what is economics |
the study of how people make choices to attain their goals given their scarce resources |
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what is microeconomics |
study of how households make choices, how they interact in markets and how the government attempts to influence their choices |
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three key economic ideas |
1. people are rational 2. people respond to economic incentive 3. optimal decisions are made at the margin (MB=MC) |
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marginal analysis |
analysis that involves comparing marginal benefit to marginal cost. |
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tradeoff |
producing more of one good or service results in producing less of another good or service due to scarcity |
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opportunity cost |
the highest valued alternative that must be given up to engage in that activity |
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centrally planned economy |
govt decided how resources will be allocated |
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market economy |
decisions of household and firms allocate economic resources |
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mixed economies |
not purely market economies |
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what are the two types of efficiency |
productive and allocative |
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productive efficiency |
when a good or service is produced at the lowest possible cost |
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allocative efficiency |
when production is in accordance with consumer preferences |
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voluntary exchange |
both the buyer and the seller of the product are made better off by the transaction |
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equity |
the fair distribution of economic benefits |
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positive analysis |
concerned with what is |
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normative analysis |
concerned with what ought to be |
