Micro Economics Vocab Chapter 1

Front 1

Economics

Back 1

the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society

Front 2

scarcity

Back 2

the goods available are too few to satisfy individuals' desires

Front 3

deduction

Back 3

a method of reasoning in which on deduces a theory based on a set of almost self-evident principles

Front 4

induction

Back 4

a method of reasoning in which one develops general principles by looking for patterns in the data

Front 5

marginal costs

Back 5

the additional cost to you over and above the costs you have already incurred

Front 6

sunk costs

Back 6

costs that have already been incurred and cannot be recovered

Front 7

marginal benefit

Back 7

the additional benefit above what youve already derived

Front 8

economic decision rule

Back 8

if the marginal benefits of doing something exceeds the marginal cost, do it

if the marginal costs of doing something exceed the marginal benefits, dont do it

Front 9

opportunity cost

Back 9

the benefit that you might have gained from choosing the next-best alternative

Front 10

economic forces

Back 10

the necessary reactions to scarcity

Front 11

market force

Back 11

an economic force that is given relatively free rein by society to work through the market

Front 12

invisible hand

Back 12

the price mechanism, the rise and fall of prices that guides our actions in a market

Front 13

abduction

Back 13

a method of analysis that uses a combination of inductive methods and deductive methods

Front 14

economic model

Back 14

a frame work that places the generalized insights of the theory in a more specific contextual setting

Front 15

economic principle

Back 15

a commonly held economic insight stated as a law or general assumption

Front 16

experimental economics

Back 16

a branch of economics that studies the economy through controlled laboratory experiments

Front 17

natural experiments

Back 17

naturally occurring events that approximate a controlled experiment where something has changed in one place but has not changed somewhere else

Front 18

theorems

Back 18

propositions that are logically true based on the assumptions in a model

Front 19

precepts

Back 19

policy rules that conclude that a particular course of action is preferable

Front 20

efficiency

Back 20

achieving a goal as cheaply as possible

Front 21

invisible hand theorem

Back 21

a market economy, through the price mechanism, will tend to allocate resources efficiently

Front 22

microeconomics

Back 22

the study of individual choice, and how that choice is influenced by economic forces

Front 23

macroeconomics

Back 23

the study of the economy as a whole

Front 24

positive economics

Back 24

the study of what is, and how the economy works

Front 25

normative economics

Back 25

the study of what the goals of the economy should be

Front 26

art of economics

Back 26

the application of the knowledge learned in positive economics to the achievement of the goals one has determined in the normative economics

Front 27

economic policy

Back 27

actions (or inaction) taken by government to influence economic actions