Macroeconomics Chapter 1
Economic Agent
An individual or a group that makes choices.
Positive Economics
Analysis that generates objective descriptions or predictions about the world that can be verified with data.
Normative Economics
Analysis that prescribes what an individual or society ought to do.
Empiricism
Analysis that uses data. Economists use data to test theories and to determine what is causing things to happen in the world.
Budget Constraint
Shows the bundle of goods or services that a customer can choose given her limited budget.
Equilibrium
Special situation in which everyone is simultaneously optimizing, so nobody would benefit personality by changing his or her own behavior.
Scarce Resources
Things that people want, where quantity that people want exceeds the quantity that is available.
Optimization
Trying to choose the best feasible option, given the available information.
Cost-Benefit Analysis
A calculation that adds up costs and benefits using a common unit of measurement, like dollars.
Opportunity Cost
Best alternative use for a resource.
Scarcity
The situation of having unlimited wants in a world of limited resources.
Economics
The study of how agents choose to allocate scare resources and how those choices affect society.
Microeconomics
The study of how individuals, households, firms, and governments make choices, and how those choices affect prices, the allocation of resources, and the well-being of other agents.
Macroeconomics
The study of the economy as a whole. Macroeconomists study economy-wide phenomena, like the growth rate of a country's total economic output, the inflation rate, or the unemployment rate.
Trade-Off
When the agent needs to give up one thing to get something else.