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27 Cards in this Set
- Front
- Back
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Scarcity |
Our inability to satisfy all our wants. |
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Incentive |
A reward that encourages an action or a penalty that discourages one. |
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Economics |
The social science that studies the choices that individuals, businesses, governments and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices. |
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Microeconomics |
The study of the choices that individuals and businesses make, the way these choices interact in markets and the influence of governments. |
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Macroeconomics |
The study of the performance of the national economy and the global economy. |
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Goods and services |
The objects that people value and produce to satisfy human wants. |
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Factors of production |
Land, labour, capital, entrepreneurship |
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What each factor of production earns |
Land - rent Labour - wages Capital - interest Entrepreneurship - profit |
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Self-interest |
A choice made where you think that choice is the best one available for you |
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Social interest |
A choice leading to an outcome that is the best for society as a whole (focuses on effeciency and fairness) |
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Globalisation |
The expansion of international trade, borrowing and lending, and investment |
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Rational choice |
Compares costs and benefits and achieves the greatest benefit over cost for the person making the choice |
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What is benefit determined by? |
Personal preferences |
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What is benefit measured by? |
The most a person would be willing to give up to get something |
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Opportunity cost |
The highest-valued alternative that must be given up to get something. (involves time and money) |
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Marginal benefit |
The benefit that arises from an increase in an activity |
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Central idea of economics |
We can predict the self-interested choices that people make by looking at the incentives they face. |
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Positive statement |
A statement about what is |
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Normative statement |
A statement about what ought to be |
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Economic models |
A description of some aspect of the economic world that includes only those features that are needed for the purpose at hand |
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How is an economic model tested? |
By comparing its predictions with the facts |
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How do economists cope with the problems involving the testing of economic models? |
- looking for natural experiments -conducting statistical investigations to find correlations -performing economic experiments to see how various factors influence decision-making |
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Ceteris paribus |
"other things being equal" The logical device used to isolate the factor of interest and investigate its effects in the clearest possible way, by changing one factor at a time and holding other relevant factors constant. |
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Fallacies |
Errors of reasoning that lead to a wrong conclusion |
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Fallacy of Composition |
What is true of the parts is true of the whole or that what is true of the whole is true of the parts. |
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Post Hoc Fallacy |
"after this, therefore because of this" A first event causes a second event, because the first event occurred before the second. |
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What can cause a graph to be misleading? |
-breaks in axes -stretched or compressed scales |
