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Definition
-Our inability to get everything that we want is scarcity
-limited by the productive resources available: the gifts of nature, human labor and ingenuity, and all the previously produced tools and equipment |
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Definition
-a reward that encourages an action or a penalty that discourages one
-people respond to incentives |
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Definition
| the social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices |
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Term
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Definition
-the study of the performance of the national economy and the global economy
-some examples of macro questions: Why is US unemployment rate so high? Can the Federal Reserve make our economy expand by cutting interest rates? |
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Term
| Two big economic questions? |
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Definition
1) How do choices end up determining what, how and for whom goods and services are produced?
2) Can we organize our economic lives so that when each one of us makes choices that are in our self-interest, we promote the social interest? |
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Definition
What to produce?
-choices end up determining quantity and determining patterns of production |
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Term
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Definition
goods and services are produced by using productive resources that economists call factors of production:
-Land
-Labor
-Capital
-Entrepreneurship |
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Definition
Do goods and services go to those who benefit most from them?
-who gets goods and services depends on income- people earn income by selling the services of the factors of production
-Land earns rent
-labor earns wages
-capital earns interest
-entrepreneurship earns profit |
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Term
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Definition
benefit from pursuing an incremental increase in an activity
-will make choice to do something if MB>MC |
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Term
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Definition
| the opportunity cost of an increase in an activity |
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Term
| Opportunity Cost of something |
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Definition
the highest valued alternative that must be given up to get it
-for any activity, if MB>MC, people have incentive to do more of that activity |
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Term
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Definition
comparing marginal benefit to marginal cost to make decision
-if MB>MC: do activity
-if MB |
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Term
| Testing an economic model |
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Definition
-difficult because we observe the outcomes of the simultaneous operations of many factors
-tested by comparing its predictions to the factors
descriptive of some aspects of the business world that includes only those features that are needed for the purpose |
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