Econ. Chapter 1

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Economics

Back 1

The social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity

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Economic perspective

Back 2

A viewpoint that envisions individuals and institutions making rational decisions by comparing the marginal benefits and marginal costs associated with their actions.

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Opportunity cost

Back 3

The amount of other products that must be forgone or sacrificed to produce a unit of a product

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utility

Back 4

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.

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marginal analysis

Back 5

the comparison of marginal ("extra" or "additional") benefits and marginal costs, usually for decision making.

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scientific method

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the proceedure for the systematic pursuit of knowledge involving the observation of facts and the formulation and testing of hypotheses to obtain theories, principles, and laws

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economic principle

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A widely accepted generalization about the economic behavor of individuals or institutions

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other-things-equal assumption

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those being considered are held constant. ceteris paribus assumption.

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macroeconomics

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the part of economies 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.

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aggregate

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A collection of specific economic units treated as if they were one. For example, all prices of individual goods and services are combined into a price level, or all units of output are aggregated into gross domestic product.

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microeconomics

Back 11

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.

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positive economics

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the analysis of facts or data to establish scientific generalizations about economic behavior.

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normative economics

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the part of economicsinvolving value judgements about what the economy should belike; focused on which economic goals and policies should be implemented; policy economics

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economizing problem

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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).

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budget line

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a line that shows the different combinations of two products a consumer can purchase with a specific money income, given the product's prices.

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economic resources

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the land, labor, capital, and entreprenurial ability that are used in the productionm of goods and services; productive agents; factors of production

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land

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natural resources ("free gifts of nature") used to produce goods and services.

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labor

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People's physical and mental talents and efforts that are used to help produce goods and services.

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capital

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human made resources (buildings, machiners, and equipment) used to produce goods and services; goods that do not directly satisfy human wants; also called capital goods.

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investment

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spending for the production and accumulation of capital and additions to inventories.

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entrepreneurial ability

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the human resource that combines the other resources to produce a product, makes nonroutine decisions, innovates, and bears risk

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factors of production

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economic resources: land, capital, labor, and entrepreneurial ability

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consumer goods

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products and services that ssatisfyu human wants directly

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capital goods

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human made resources (buildings, machinery, and equioment) used to produce goods and services; goods that do not directly satisfy human wants; also called capital goods.

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production possibilties curve

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A curve showing the different comnbinations of two goods or services that can be produced in full employment, full production, economy where the available supplies of resources and technology are fixed.

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law of increasing opportunity costs

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the principle that as the production of a good increases, the opportunity cost of producing an additional unit rises.

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economic growth

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1. an outward shift in the productioin possibilities curve that results from an increase in resource supplies or quality or an improvement in technology 2. an increase of real output (gross domestic product ) or real output per capita