Please enter something

Chapter 1: Limits, Alternatives, and Choices

question

economics
answer

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

economic perspective
answer

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

opportunity cost
answer

the amount of other products that must be forgone or sacrificed to produce a unit of a product.
question

utility
answer

the want-satisfying power of a good or service; the satisfaction or pleasure a consumer obtains from the consumption of a good or service.
question

marginal analysis
answer

the comparison of marginal (“extra” or “additional”) benefits and marginal costs, usually for decision making.
question

scientific method
answer

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.
question

economic principle
answer

a widely accepted generalization about the economic behavior of individuals or institutions.
question

other-things-equal assumption (ceteris paribus)
answer

the assumption that factors other than those being considered are held constant.
question

macroeconomics
answer

the part of economics concerned with the economy as a whole; with such major aggregates as the household, business, and government sectors; and with measures of the total economy
question

aggregate
answer

a collection of specific economic units treated as if they were one, for example, all prices of individual goods and services are combined into a price level, or all units of output are aggregated into gross domestic product.
question

microeconomics
answer

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

positive economics
answer

the analysis of facts or data to establish scientific generalizations about economic behavior.
question

normative economics
answer

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

economizing problem
answer

the choices necessitated because society’s economic wants for goods and services are unlimited but the resources available to satisfy these wants are limited.
question

budget line
answer

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

economic resources
answer

the land, labor, capital, and entrepreneurial ability that are used in the production of goods and services; production agents; factors of production
question

land
answer

natural resources (“free gifts of nature”) used to produce goods and services.
question

labor
answer

people’s physical and mental talents and efforts that are used to help produce goods and services.
question

capital
answer

human-made resources (buildings, machinery, and equipment) used to produce goods and services; goods that do not directly satisfy human wants.
question

investment
answer

spending for the production and accumulation of capital and additions to inventories.
question

entrepreneurial ability
answer

the human resource that combines the other resources to produce a product, makes nonroutine decisions, innovates, and bears risks.
question

consumer goods
answer

products and services that satisfy human wants directly
question

production possibilities curve
answer

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

law of increasing opportunity cost
answer

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

economic growth
answer

an outward shift in the production possibilities curve that results from an increase in resource supplies or quality or an improvement in technology.
question

fallacy of composition
answer

the false notion that what is true for the individual (or part) is necessarily true for the group (or whole)
question

post hoc, ergo propter hoc fallacy
answer

the false belief that when one event precedes another, the first event must have caused the second event