Microeconomics A202 Chapter 1

Front 1

Economics

Back 1

The study of how humans coordinate their wants and desires.

Front 2

Coordination

Back 2

How the three main economy problems are solved.

Front 3

Three main economy problems

Back 3

1. What, and how much, to produce.

2. How to produce it.

3. For whom to produce it.

Front 4

Scarcity

Back 4

The goods available are too few to satisfy individuals' desires.

Front 5

Deduction

Back 5

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

Front 6

Induction

Back 6

A method of reasoning in which on develops general principles by looking for patterns in the data.

Front 7

Economic Reasoning

Back 7

Making decisions on the basis of costs and benefits.

Front 8

TANSTAAFL

Back 8

There Ain't No Such Thing As A Free Lunch

Front 9

Marginal Cost

Back 9

Costs in addition to the costs that have already incurred.

Front 10

Sunk Costs

Back 10

Costs that have already been incurred and cannot be recovered.

Front 11

Marginal Benefit

Back 11

The additional benefit above what's already been derived.

Front 12

Economic Decision Rule

Back 12

If the marginal benefits of doing something exceed the marginal costs, do it, and vice-versa.

Front 13

Opportunity Cost

Back 13

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

Front 14

Economic forces

Back 14

The necessary reactions to scarcity.

Front 15

Market Force

Back 15

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

Front 16

Invisible Hand

Back 16

The price mechanism, the rise and fall of prices that guides out actions in a market.

Front 17

The three forces economic reality is controlled by.

Back 17

1. Economic forces (the invisible hand).
2. Social and cultural forces.
3. Political and legal forces.

Front 18

Abduction

Back 18

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

Front 19

Economic Model

Back 19

A simplified framework designed to illustrate complex processes.

Front 20

Economic Principle

Back 20

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

Front 21

Experimental economics

Back 21

A branch of economics that studies the economy through controlled lab experiments.

Front 22

Natural Experiments

Back 22

Naturally occurring events that approximate a controlled experiment

Front 23

Theorems

Back 23

Propositions that are logically true based on the assumptions in a model.

Front 24

Precepts

Back 24

Rules that conclude that a particular course of action is preferable.

Front 25

Invisible Hand Theorem

Back 25

A market economy, through the price mechanism, will tend to distribute resources efficiently.

Front 26

Microeconomics

Back 26

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

Front 27

Macroeconomics

Back 27

The study of the economy as a whole.

Front 28

Positive Economics

Back 28

The study of what is, and how the economy works.

Front 29

Normative Economics

Back 29

The study of what the goals of the economy should be.

Front 30

Art of Economics

Back 30

Application of the knowledge learned in positive economics to achieve the goals one has determined in normative economics.