Econ Ch 2

The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________.

allocative efficiency

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

budget constraint

Marginal thinking is best demonstrated by:

choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.

Scarcity implies that:

it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.

normative statement

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the budget constraint, sometimes also called the _______________, a diagram which shows what choices are possible.

opportunity set

Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be.

positive statements

Scarcity exists because of:

unlimited wants and limited resources

The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern.

utility

Why is there scarcity?

Because our unlimited wants exceed our limited resources.

The opportunity cost of an action:

is a subjective valuation that can be determined only by the individual who chooses the action.