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| Stude of the aggregate or total economy (whole society) |
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| Any item desired by people |
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*Land
*Labor
*Capital
*Entrepeneurship |
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| happiness that economists assume people maximize |
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| Goods used to make other goods |
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| Process by which we determine who gets what |
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| Exists because of scarcity |
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| Next best alternative forgone when using a resource |
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| When individuals make decision by comparing marginal benefits to marginal costs |
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| Marginal Benefit = Marginal Cost |
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| That they weigh the costs and benefits rationally |
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| What is true for one is not always true for the whole. |
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| Just because one thing occurs before (or is somehow associated) another does not mean that it caused it. |
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| Not a common mistake, but rather a tool of scientific reasoning that means "all things equal" and it means we are to assume that nothing in the world changes. |
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| The economics of what is. This is descriptive of fact and theory without opinion. |
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| The economic of what should be. This is economics where one's opinion is offered. |
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| Studies the behavior of individual people and firms. |
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| Studies the behavior of entire economics as a whole. |
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| Abstract representation of the real world designed with the intent of better understanding the world. |
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| Production Possibilities Table |
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| A table that shows all combinations of goods and services that can be produced given the resources of societ and the existing state of technology |
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| Production Possibilities Frontier |
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| Graph that shows all combinations of goods and services that can be produced given the resources of society and the existing state of technology. |
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| The next best alternative forgone when a resource is used. |
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| Opportunity Cost of a Good or Service Produced = |
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Definition
| Units of good or service forgone / Units of a good or service produced |
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| Law of Increasing Opportunity Cost |
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Definition
| Generally, as we make more and more of a good, the opportunity cost of making it increases. |
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| Constant Opportunity Cost |
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| Slope of PPF is constant. |
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| Economy must not be able to produce more of one good without producing less of another. (AKA must be on PPF) |
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| Illustrates the (1) different combinations of goods the economy can produce given the physical constraints of (2) finite resources and (3) the current state of technology |
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| Imposes a third constraint: institutional constraints such as minimum wage laws or price controls. |
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| shows the relationship between what people want to buy and what firms are willing to sell. |
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| Demand is made up of 2 elements.. |
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1. Desire for goods and services
2. Means to purchase those goods and services |
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| The willingness and ability of buyers to purchase different quanitites of a good at different price during a specific time period. |
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| Price of the good in money terms |
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| Price of the good in term of another good |
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| A table showing the relationship between the price of a good and the quanity demanded per period of time, (ceteris paribus). |
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