Macroeconomics1

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economics

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

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economic perspective

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economic way of thinking

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opportunity costs

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to obtain more of one thing, society forgoes the opportunity of getting the next best thing

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utility

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the pleasure, happiness, or satisfaction obtained from consuming a good or service

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marginal analysis

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comparisons of marginal benefits and marginal costs, usually for decision making

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the scientific method

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like all sciences, economics relies on this

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economic principle

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a statement about economic behavior or the economy that enables prediction of the probable effects of certain actions

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other-things-equal assumption

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the assumption that factors other than those being considered do not change

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microeconomics

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the part of economics concerned with individual units such as a person, a household, a firm, or an industry

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macroeconomics

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examines either the economy as a whole or its basic subdivisions or aggregates such as the government, household, and business sectors

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aggregate

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a collection of specific economics units treated as if they were one unit

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positive economics

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focuses on facts and cause-and-effect relationships

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normative economics

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incorporates value judgements about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal

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economizing problem

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the need to make choices because economic wants exceed economic means

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budget line

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a schedule or curve that shows various combinations of two products a consumer can purchase with a specific money income

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land

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includes all natural resources used in the production process

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labor

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consists of the physical and mental talents of individuals used in producing goods and services

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capital

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incluses all manufactured aids used in producing consumer goods and services

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investment

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the purchase of capital goods

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entrepreneurial ability

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the human resource that combines the other resources to produce a product, makes non routine decisions, innovates, and bears risks

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factors of production

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inputs

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consumer goods

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products that satisfy our wants directly

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capital goods

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products that satisfy our wants indirectly by making possible more efficient production of consumer goods

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production possibilities curve

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displays the different combinations of goods and services that society can produce in a fully employed economy, assuming a fixed availability of supplies of resources and constant technology

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law of increasing opportunity costs

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as the production of a particular good increases, the opportunity cost of producing an additional unit rises

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economic growth

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a larger total output

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economic resources

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all natural, human, and manufactured resources that go into the production of goods and services

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horizontal axis

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the "left-right" or "west-east" measurement line on graph or grid

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vertical axis

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the "up-down" or "north-south" measurement on graph or grid

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direct relationship

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the relationship between two variables that change in the same direction; positive relationship

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inverse relationship

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the relationship between two variables that change in the opposite direction, negative relationship

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independent variable

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the variable causing a change in some other (dependent) variable

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dependent variable

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a variable that changes as a consequence of a change in some other (independent) variable; the "effect" or outcome

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slope of a straight line

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the ratio of the vertical change (the rise or fall) to the horizontal changes (the run) between any two points on a line

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vertical intercept

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the point at which a line meets the vertical axis on a graph or grid