A group of buyers and seller of a good or service and the institution or arrangement by which they come together to trade

1. People are rational

2. People respond to economic incentives

3. Optimal decisions are made at the margin

Extra or Additional (positive or negative)

IE) Should you spend another hour watching TV or spend that hour studying?
Marginal Benefit: Additional enjoyment received from watching more TV

Marginal Cost: Lower grade you receive from studying less

Producing more of one good or service means producing less of one good or service

IE) Doing more Math homework will take away time from doing Physics homework

Highest valued alternative that must be given up to engage in any activity or service.

IE) Someone was offered a job with an annual salary of 80k, but decides to start their own business instead. The opportunity cost of doing so is $80k, although the person didn't technically spend any money.

What are the two types of efficiency?

Productive Efficiency

Allocative Efficiency

When a good or service is produced at the lowest possible cost

IE) If Microsoft needs to buy Vapor MG for its Surface product, it will buy from the company that offers the cheapest Vapor MG

The act of buyers and sellers freely participating in a market

Economists make assumptions that the motives of consumers and firms is to maximize their well being and/or satisfaction.

IE) If a consumer walks into Best Buy and there is an iPod for full price and the same iPod on sale, they will buy the iPod on sale

1. Decide on the assumptions to use in developing the model

2. Formulate a testable hypothesis

3. Use economic data to test the hypothesis

4. Revise the model if it fails to explain well the economic data

5. Retain the revised model to help answer similiar economic questions in the future

Something measurable that cna have different values

IE) Wages paid to software programmers

It applies the scientific method to the study of interactions among individuals

(And because of the misuse of the word 'science' and individual with bruised egos who want to feel important)

Concerned with what is. Shows consequences of an action or policy, but cannot tell us whether the policy is 'good' or 'bad'.

IE) How many Surface tablets are sold

Concerned with what was expected

IE) How many Surface tablets were expected to sell

The study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices

IE) Microeconomics explains why the sales of the HP Touchpad went up when the price was slashed to $99

The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth.

IE) Macroeconomics would explain why the platform gaming industry is falling versus the smartphone gaming industry rising

Someone who operates a business, deciding what goods and services to produce and how to produce them

IE) The team behind OUYA are entrepreneurs

Practical use and application of an invention rather than one itself

IE) Google makes an invention, Android OS, and OEMs such as HTC distribute it in their phones, which is innovation.

Processes a firm uses to produce goods and services. Depends on many things, such as the skill of its managers, the training of its workers, and the spped and efficiency of its machinery and equipment

IE) Because Google implements an exhaustive hiring process, its managers are incredibly capable. Therefore, Google has effective technology.

A firm is an organziation that produces a good or service. Economists use the terms interchangably.

IE) Samsung produces the Retina screens for Apple products, and is therefore a firm.

Tangible merchandise

IE) An ultrabook from Lenovo

Activies done for others

IE) The Genius Bar at Apple Stores

The total amount received for selling a good or service

IE) Nintendo had a positive revenue in Q3 of 2012, but still had a negative profit.

The difference between a firm's revenue and its costs

IE) Nintendo had a positive revenue in Q3 of 2012, but still had a negative profit.

Firms use factors of production to produce goods and services.

IE) Factors of production include the underage interns at Foxconn that were recently removed from the workforce

Manufactored goods that are used to produce other goods and services

IE) Computers produced by DELL are used by programmers to create apps for Google Play

The accumulated training and skills taht workers possess

IE) Someone who graduated from college with a BS in Computer Science is more likely to get higher at Microsoft than someone with a G.E.D