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Chapter 1 Key Terms
Vocabulary for Chapter 1 of CASE & FAIR
31
Economics
Undergraduate 1
01/20/2007

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Term
economics
Definition
study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided
Term
opportunity cost
Definition
the best alternatve that we give up when we make a choice / decision
Term
scarce
Definition
limited
Term
marginalism
Definition
process of analyzing the additional or incremental costs or benefits arising from a choice or decision
Term
sunk costs
Definition
costs that cannot be avoided, regardless of what is done in the future, because they have already been incurred
Term
efficient market
Definition
a market in which profit opportunities are eliminated almost instantaneously
Term
Industrial Revolution
Definition
the period in England during the late 18th and early 19th centuries, in which new manufacturing technologies and improved transportation gave rise to

(1) the modern factory system
(2) a massive movement of population from country to the cities
Term
microeconomics
Definition
branch of economics that examines the functioning of INDVIDUAL industries and the behavior of INDIVIDUAL decision-making units––that is, business firms and households
Term
macroeconomics
Definition
the branch of economics that examines the economics behavior of AGGREGATES––income, employment, output, and so on––on a national scale
Term
positive economics
Definition
an approach to economics that seeks to understand behavior and the operation of systems WITHOUT making judgments; describes what exists and how it works
Term
normative economics
Definition
an approach to economics that analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe courses of action; aka POLICY ECONOMICS
Term
descriptive economics
Definition
the compilation of data that describe phenomena and facts
Term
economic theory
Definition
a statement or set of related statements about cause and effect, action and reaction
Term
model
Definition
a format statement of a theory, usually a mathematical statement of a presumed relationship between 2+ variables
Term
variable
Definition
a measure that can change from time to time or from observation to observation
Term
Ockham's razor
Definition
the principle that irrelevant detail should be cut away
Term
ceteris paribus / all else equal
Definition
a device used to analyze the relationships between 2 variables while the values of other variables are held unchanged
Term
post hoc, ergo propter hoc
Definition
"after this (in time), therefore because of this"; a common error made in thinking about causation––if Event A happens before Event B, it is not necessarily true that A casued B
Term
fallacy of composition
Definition
the erroneous belief that what is true for a part is necessarily true for the whole
Term
empirical economics
Definition
the collection and use of data to test economic theories
Term
efficiency
Definition
in economics, allocative efficiency; an efficient economy is one that produces what people want at the least possible cost
Term
equity
Definition
fairness
Term
economic growth
Definition
an increase in the total output of an economy
Term
stability
Definition
a condition in which national output is growing steadily, w/ low inflation and full employment of resources
Term
Cartesian coordinate system
Definition
method of graphing 2 variables that makes use of 2 perpendicular lines against which the variables are plotted
Term
graph
Definition
a 2D representation of #s or data
Term
negative relationship
Definition
a relationship between 2 variables, X and Y, in which a decrease in X is associated with an increases in Y, and vice versa
Term
origin
Definition
on a Cartesian coordinate system, the point at which the horizontal and vertical axes interact
Term
positive relationship
Definition
a relationship between 2 variables, X and Y, in which a increase in X is associated with an increases in Y, and vice versa
Term
slope
Definition
measurement that indicates whether the relationship between variables is positive or negative and how much of a response there is in Y (variable on the vertical axis) when X (variable on the horizontal axis) changes
Term
time series graph
Definition
graph illustrating how a variable changes over time
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