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Economics

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The social science concerned with how individuals, institutions, and society make optimal (best) choices under conditions of scarcity

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Scarcity

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The limits placed on the amounts and types of goods and services available for consumptions as the result of there being only limited economic resources from which to produce output; the fundamental economic constraint that creates opportunity costs and that necessitates the use of marginal analysis (cost-benefit analysis) to make optimal choices

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Economic Perspective

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A viewpoint that envisions individuals and institutions making rational decisions by comparing the marginal benefits and marginal costs associated with their actions

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Opportunity Cost

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The amount of other products that must be forgone or scarified to produce a unit of a product

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Utility

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The want-satisfying power of a good or service; the satisfaction of pleasure a consumer obtains from the consumption of a good or service (or from the consumption of a collection of goods or services)

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Marginal Analysis

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The comparison of marginal ("extra" or "additional") benefits and marginal costs, usually for decision making

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Scientific Method

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The procedure for the systematic pursuit of knowledge involving the observation of facts and the formulation and testing of hypotheses to obtain theories, principles, and laws

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Economic Principle

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A widely accepted generalization about the economic behavior of individuals or institutions

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Other-Things-Equal Assumption

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The assumption that factors other than those ebing considered are held constant

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Micro

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The part of economics concerned with decision making by individual units such as a household, a firm, or an industry and individuals markets, specific goods and services, and product and resource prices

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Macro

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The part of economics concerned with the performance and behavior of the economy as a whole. Focuses on economics growth, the business cycle, interest rates, inflation, and the behavior of major economic aggregates such as the household, business, and government sectors

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Aggregate

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A collection of specific economic united treated as if they were one unit. Examples: the prices of all individual goods and services are combined into the price level, and all units of output are aggregated into gross domestic product

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Positive Economics

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The analysis of facts or data to establish scientific generalizations about economic behavior

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Normative Economics

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The part of economics involving value judgements about what the economy should be like; focused on which economic goals and policies should be implemented; policy economics

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Economizing Problems

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The choices necessitated because society's economic wants for goods and services are unlimited but the resources available to satisfy these wants are limited (scarce)

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Budget Line

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A line that shows the different combinations of two products a consumer can purchase with a specific money income, given the products' prices

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Economic Resources

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The land, labor, capital, and entrepreneurial ability that are used to produce goods and services; the factors of production

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Factors of Production

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The four economic resources: land, labor, capital, and entrepreneurial ability

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Land

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In addition to the part of the earth's surface not covered by water, this term refers to any and all natural resources that are used to produce goods and services. Thus, it includes the oceans, sunshine, coal deposits, forests, the electromagnetic spectrum, and fisheries. Note that land is one of the four economic resources

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Labor

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Any mental or physical exertion on the part of a human being that is used in the production of a good or service. One of the four economic resources

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Capital

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Human-made resources (buildings, machinery, and equipment) used to produce goods and services; goods that do not directly satisfy human wants; also called capital goods. One of the four economic resources

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Investment

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In economics, spending for the production and accumulation of capital and additions to inventories

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Entrepreneurial Ability

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The human resource that combines the other economic resources of land, labor, and capital to produce new products or make innovations in the production of existing products; provided by entrepreneurs

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Consumer Goods

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Products and services that satisfy human wants directly

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Production Possibilities Curve

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A curve showing the different combinations of two goods or services that can be produced in a full-employment, full-production economy where the available supplies of resources and technology are fixed

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Law of Increasing Opportunity Costs

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The principle that as the production of a good increases, the opportunity cost of producing an additional unit rises

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Economic Growth

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An outward shift in the production possibilities curve that results from an increase in resource supplies or quality or an improvement in technology An increase of real output (GDP) or real output per capita

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The four types of economic resources are

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Land Labor Capital Entrepreneurial Ability

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When a production possibilities table or curve in constructed, four assumptions are made

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Full employment Fixed resources Fixed technology 2 types of goods being produced (capital and consumer good)

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What statement would best complete a short definition of economics?? Economic studies

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how individuals, institutions, and society make optimal choices under conditions of scarcity

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The idea in economic that "there is no such thing as a free lunch" means that

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Scarce resources have alternative uses or opportunity costs

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The opportunity cost of a new public stadium is the

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other goods and services that must be sacrificed to construct the new stadium

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From the economic perspective, when a business decides to employ more workers, the business decision maker has most likely concluded that the marginal

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benefits of employing more workers are greater than the marginal costs

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The combination of economic theories or principles into a simplified representation of reality is referred to as an economic

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model

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Which would be studied in micro?

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the output and price of wheat in the United States

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When we look at the whole economy or its major aggregates, our analysis would be at the level of

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macroeconomics

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Which is a normative economic statement?

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The unemployment rate of 6.8 percent is too high

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Sandra states that "there is a high correlation between consumption and income." Arthur replies that the correlation occurs because "people consume too much of their income and don't save enough"

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Sandra's statement is positive and Arthur's statement is normative

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Tools, machinery, or equipment used to produce other goods would be examples of

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capital goods

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An entrepreneur innovates by

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commercializing new product for a market

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When a production possibilities schedule is written in this chapter, four assumptions are made. Which is one of those assumptions?

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The economy has full employment of available resources

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What is the economic rationale for the law of increasing opportunity costs?

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Economic resources are not completely adaptable to alternative uses

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The under allocation of resources by society to the production of a product means that the

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marginal benefit is greater than the marginal cost

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If there is an increase in the resources available within the economy,

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the economy will be capable of producing more goods

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Which situation would most likely shift the production possibilities curve for a nation in an outward direction?

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Increase in technological advance

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You observe that more education is associated with more income and conclude that more income leads to more education. This would be an example of

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confusing the correlation and causation

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The attempt to establish scientific statements about economic behavior; a concern with "what is" rather than "what ought to be"

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Positive Economics

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Part of economics that involves value judgements about the economy should be like or the way the economic world should be

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Normative Economics

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Social science that studies how individuals, institutions, and society make optimal choices under conditions of scarcity

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Economics

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Part of economics that concerned with the economic behavior of individual units such as households, firms, and industries (particular markets)

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Micro

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The comparison of additional benefits and additional costs

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Marginal analysis

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Part of economics concerned with the whole economy or its major sectors

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Marco

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