Economics Ch. 1

Economic Variable

Something measurable that can have different values, such as the wages of software programmers.

Opuurtunity Costs

The highest valued given alternative that must be given up to engage in an activity.

Microeconomics

The study of how households and firms make choices, how they intereact in markets, and how the government attempts to influence their choices.

Economics

The study of the choices people make to attain their goals, given their scarce resources.

Economic Model

The study of the choices people, make to attain their goals, given their scarce resources.

Macroeconomics

The study of the economy as a whole, including topics such as inflation, unemployment and economic growth.

Productive Efficiency

A situation in which a good or service is produced at the lowest possible cost.

Voluntary Exchange

A situation that occurs in markets when both the buyer and seller of a product are made better off by the transaction.

Allocative Efficiency

A state of the economy in which production is in accordance with consumerprefrences, in particular, every good or serivce is produced up to the point where the last unit provides a marginal benifit to socitey equal to the marginal cost of producing it.

Mixed Economy

An economy in which most economic descions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.

Market Economy

An economy in which the desicions of households and firms interacting in markets allocate economic resources.

Centrally Planned Economy

An economy in which the government decides how economic resources will be allocated.

Positive Analysis

Analysis concerned with what is .

Normative Analysis

Analysis concerned with what ought to be

Marginal Analysis

Analysis that involoves comparing marginal benifits and marginal costs.

Scaricity

Asituation in which unlimted wants exceeds the limited resources available to fullfill those wants.

Trade Off

The idea that because of scarcity, producing more of one good or service means producing less of another good or service.