Arec- Chapter 1-5

The Incentive Principle

A person (or a firm or a society) is more likely to take an action if its benefit rises, and less likely to take it if its cost rises. In short, incentives matter.

Independent Variable

A variable in an equation whose value determines the value taken by another variable in the equation

A sunk cost is?

a cost that is beyond recovery at the moment a decision must be made

A variable

is a quantity that is free to take on different values

In standard economic models, a rational person?

makes choices by weighing the extra benefits of an action against its extra cost

Slope:

ratio of the vertical distance the straight line travels between any two points to the corresponding horizontal distance

Macroeconomics is the study of?

the performance of national economies and the policies that governments use to try and improve that performance

Dependent Variable

A variable in an equation whose value is determined by the value taken by another variable in the equation