Economic Principles Ch 1-3

Front 1

normative economics -

Back 1

"what should be", Opinions

Front 2

Economics -

Back 2

Social science concerned with the efficient use of scarce resources to maximize satisfaction of unlimited human wants. The fundamental economic problem is one of scarce resources relative to human wants. Such scarcity can never be eliminated; it implies we must make choices

Front 3

Macroeconomics –

Back 3

the study of economics as a whole or its basic aggregates such as the business, household, and government sectors.

Front 4

microeconomics –

Back 4

the study of specific economic units such as particular firms, households, or markets, studies how supply and demand determine prices in individual markets

Front 5

marginal benefit & cost analysis –

Back 5

extra, additional, movement form one situation to the next, maximized when MB=MC, MC should never exceed MB

Front 6

positive economics

Back 6

- "what is", "what will be", Factual, non-judgmental

Front 7

complementary good

Back 7

– two products, for which an increase (or fall) in DEMAND for one leads to an increase (fall) in demand for the other.

Front 8

normal good

Back 8

- A good for which an increase in income causes an increase in demand, or a rightward shift in the demand curve, income rises the purchase of normal goods will increase, goods for which demand increases as income increases

Front 9

inferior good

Back 9

– is a good that when income increases, purchases of the inferior good decrease and as incomes fall, purchases of the inferior good increase, demand shifts to the left when income increases, quantity demanded and income move in opposite directions, all else equal

Front 10

allocative efficiency

Back 10

- means that the goods and services produced are the combination most desired by society

Front 11

markets

Back 11

- lead to efficiency, provide Incentives such as Income and Profits

Front 12

productive efficiency

Back 12

- means that the goods and services are produced in the least costly fashion

Front 13

Increasing marginal opportunity costs

Back 13

As more of one good is produced, more and more of the other good must be sacrificed. Seen in the slope of the production possibilities curve, it is concave to the origin. Economic resources are not completely adaptable to alternative uses

Front 14

substitute good -

Back 14

Goods for which an increase (or fall) in DEMAND for one leads to a fall (or increase) in demand for the other.