Economics Chapter 1 Test Answer Key – Flashcards
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Alyssa McGinnis
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Mr.Ray's Student.
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Economics
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The study of how people choose to use their limited resources to satisfy their unlimited wants.
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Economy
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A system used to manage limited resources for the production, disturbution, and consumption of goods and services.
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Positive Economics
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The branch of conomics that uses objective analysis to find out how the economy actually works.
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Normative Economics
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The branch of economics that makes value judgements about the economy; its focus on which economic policies should be implemented.
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Scarcity
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The condition that results because people have limited resources but unlimited wants.
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Tradeoff
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The exchange of one benefit or advantage for another that is thought to be better.
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Cost-Benefit Analysis
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A way to compare the costs of an action with the benefits exceed the costs, the action is worth taking.
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Incentive
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Something that motivates a person to take a particular course of action.
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Adam Smith
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"wealth of nations" advocated the idea of laissez faire; or government not involving themselves in the economy.
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Economic Enigma
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A puzzle or riddle that may be explained through economic analysis.
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Resource
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Anything used to produce an economic good or service.
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Microeconomics
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The study of the economy at the level of individuals, households, and businesses.
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Macroeconomics
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The study of the working of the economy as a whole.
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Market
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An arrangement that brings buyers and sellers together to do business with each other.
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Invisible Hand
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Adam Smith's metaphor to explain how an individual's pursuit of economic self-interest can promote the well-being of society as a whole.
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Law of Unintended Consequenses
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The general observation that the actions of people and governments always have effects that are not expected or intended.
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Ceteris Paribus
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"other things being equal"
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Future Consoquenses Count Principle
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The idea that decisons made today have effects in the future.
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Thinking at the Margin Principle
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The idea that many decisions involve choices about using or doing a little more or a little less of something rather than making a wholesale change.
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Scarcity Forces Tradeoffs
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The idea that limited resources force people to make choices and face tradeoffs when they choose.
