Economics Private and Public Choice 13e Chapter 1

Ceteris Paribus

Latin for 'other things constant' used when the effect of one change is being described, recognizing that if other things changed they could affect the result

Rationing

allocating limited supply of a good or resource among people who would like to have it

Microeconomics

branch of economics that focuses on how human behavior affects the conduct of affairs within narrowly defined units, such as individual households or business firms

Economizing behavior

choosing the option that offers the greatest benefit at the least possible cost

Scientific Thinking

developing a theory from basic principles and testing it against events in the real world

Marginal

effects of change in a current situation

Fallacy of Composition

erroneous view that what is true for the individual (part) will be true for the group (whole)

Objective

fact based on observable phenomena that is not influenced by differences in personal opinion

Macroeconomics

focuses on how human behavior affects outcomes in highly aggregated markets, such as markets for labor or consumer products

Scarcity

fundamental concept of economics that indicated that there is less of a good freely available from nature than people would like

Opportunity cost

highest valued alternative that must be sacrificed as a result of choosing an option

Capital

human made resources like tools, equipment, and structures used to produce other goods and services. Enhance our ability to produce in the future

Secondary effects

indirect impact of event or policy that is not immediately observable, unintended and overlooked

Resource

input used to produce economic goods. Land, labor, skills, natural resources, human made tools, equipment

Normative economics

judgments about 'what ought to be' in economic matters. Cannot be proven false because they are based on value judgments

Subjective

opinion based on personal preferences and value judgments

Positive economics

scientific study of 'what is' among economic relationships

Economic theory

set of definitions, postulates, and principles assembled in a manner that makes clear the 'cause and effect' relationships

Utility

subjective benefit or satisfaction a person expects from a choice or course of action

Choice

the act of selecting among alternatives