Microeconomics and Behavior Chapter 1 Key Terms
invisible hand
term economists use to describe the self-regulating nature of the marketplace
positive economics
the branch of economic analysis that describes the way the economy actually works
external cost
an uncompensated cost that an individual or firm imposes on others
marginal analysis
analysis that involves comparing marginal benefits and marginal costs
proportional thinking
Fractions, decimals, ratios
Scarcity
Limited quantities of resources to meet unlimited wants
explicit costs
The actual payments a firm makes to its factors of production and other suppliers.
Macroeconomics
The study of the economy as a whole
Homo Economicus
a term used to describe a person who would make rational decisions in ways predicted by economic theories
cost-benefit analysis
a decision-making process in which you compare what you will sacrifice and gain by a specific action
sunk costs
costs that have already been incurred and cannot be recovered
normative economics
makes prescriptions about the way the economy should work
Economic Naturalist
someone who uses insights from economics to help make sense of observations from everyday life
Microeconomics
the study of how households and firms make decisions and how they interact in markets
Opportunity Cost
whatever must be given up to obtain some item