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Macro Ch 1,2,3,5
Macro Ch 1,2,3,5
22
Economics
Undergraduate 2
09/29/2015

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Term
Opportunity Cost
Definition
The best alternative that we forgo, or give up, when we make a choice or a decision.

scarce Limited.
Term
Marginal Cost
Definition
The process of analyzing the additional or incremental costs or benefits arising from a choice or decision.
Term
Efficient Cost
Definition
A market in which profit opportunities are eliminated almost instantaneously.

The study of economics teaches us a way of thinking and helps us make decisions.
Term
Sunk Cost
Definition
Cost already incurred: to find cost of new decision.
Term
Macroeconomics
Definition
The branch of economics that examines the economic behavior of aggregates—income, employment, output, and so on—on a national scale.
Term
Microeconomics
Definition
The branch of economics that examines the functioning of individual industries and the behavior of individual decision-making units—that is, firms and households.
Term
Positive
Definition
An approach to economics that seeks to understand behavior and the operation of systems without making judgments.
It describes what exists and how it works.
Term
Normative
Definition
An approach to economics that analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe courses of action. Also called policy economics.
Term
Fallacies
Definition
a mistaken belief, especially one based on unsound argument.
Term
Post 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 caused B.
Term
Fallacies of composition
Definition
The erroneous belief that what is true for a part is necessarily true for the whole.
Term
Capital
Definition
Things that are produced and then used in the production of other goods and services.
Term
Investment
Definition
The process of using resources to produce new capital.
Term
Comparative Advantage
Definition
that specialization and free trade will benefit all trading parties, even those that may be “absolutely” more efficient producers.
Term
absolute advantage
Definition
A producer has an absolute advantage over another in the production of a good or service if he or she can produce that product using fewer resources (a lower absolute cost per unit).
Term
Comparative advantage
Definition
A producer has a comparative advantage over another in the production of a good or service if he or she can produce that product at a lower opportunity cost.
Term
aggregate behavior
Definition
The behavior of all households and firms together.
Term
sticky prices
Definition
Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded.
Term
Classical
Definition
long term, markets are self correcting
Term
keynesian
Definition
short term, to fix changes in government spending
Term
Capital Gains
Definition
how much you bought it for and how much you sold it for
Term
Business cycle
Definition
Recession: economy declines or slows down for 2 or more consecutive quarters.
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