Macroeconomics Chapter 1 Cards – Flashcards
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economics
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study of how people seek to satisfy their needs and wants by making choices
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scarcity
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limited quantities of resources to meet unlimited wants
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deduction
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a method of reasoning in which we deduce a theory based on a set of self-evident principles
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induction
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method of reasoning in which one develops general principles by looking for patterns in the data
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marginal cost
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additional cost to you over and above the cost you already incurred
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sunk cost
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costs that have already incurred and cannot be recovered
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marginal benefit
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additional benefit above what you've already derived
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Economic Decision Rule
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if marginal benefit exceeds marginal cost, do it, and vice versa
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opportunity cost
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benefit that you might have gained from choosing the next-best alternative
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economic forces
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necessary reactions to scarcity
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market force
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an economic force that is given relatively free rein by society to work through the market
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invisible hand
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the price mechanism, the rise and fall of prices that guides our actions in the market
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abduction
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method of analysis that uses a combination of inductive and deductive methods
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economic model
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framework that places the generalized insights of the theory in a more specific contextual setting
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economic principle
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commonly held economic insight stated as a law or generalized assumption
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experimental economics
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branch of economics that studies the economy through controlled lab experiments
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natural experiments
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naturally occurring events that approximate a controlled experiment where something has changed in one place but has not somewhere else
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theorems
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propositions that are logically true based on the assumptions in a model
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precepts
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policy rules that conclude that a particular course of action is preferable
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efficiency
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achieving a goal as cheaply as possible
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invisible hand theorem
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a market economy through the price mechanism will tend to allocate resources efficiently
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microeconomics
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study of individual choice, and how that choice is influenced in economic forces
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macroeconomics
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study of the economy as a whole
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positive economics
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study of what is, and how the economy works
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normative economics
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study of what the goals of the economy should be
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art of economics
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also called political economy, is the application of positive economics and normative economics
