Term
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Definition
| The study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided. |
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Term
| Three Fundamental concepts of Economics |
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Definition
1. Opportunity Costs
2. Marginalism
3. Efficient Markets |
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Term
| What does Microeconomics mean? |
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Definition
| Deals with "micro" issues such as decisions made by individual firms and individuals |
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Term
| What does Macroeconomics mean? |
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Definition
| Deals with "macro" issues that affect the economy as a whole such as inflation, unemployment, interest rates and such. |
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Term
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Definition
| The principle states that the explanation of any phenomenon should make as few assumptions as possible, eliminating those that make no difference in the observable predictions of the explanatory hypothesis or theory. |
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Term
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Definition
| A prediction, or a statement about casual or logical connections between two variables, is qualified by Ceteruus Paribus in order to acknowledge, and to rule out, the possibility of other factors which could override the relationship between the two. |
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Term
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Definition
- When there is scarcity, not all needs can be satisfied.
- Firms, households and individuals have to make trade-offs between competing objectives
- Unlimited wants and limited needs
- Choices involve opportunity costs |
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Term
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Definition
The best alternative that we forgo, or give up when we make a choice od decision.
- Opportunity costs arise because time and resources are scarce. Nearly all decision involve trade-offs
- Can also be measured in terms of time |
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Term
| What is a Production Possibility Frontier |
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Definition
A graph illustrating the attainable choices available to a firm or economy, assuming a given level of resources and a given state of technology.
- It illustrates the concepts of scarcity, choice and opportunity cost
[image]
e.g. if business cohoes not to make any clothing, it can make 1000 food items |
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Term
| Shape of a Production Possibility Frontier |
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Definition
As the production of a good expands, the opportunity cost of producing additional units generally increases.
- If on the line, company is being efficient
- If inside line, business is being inefficient and can not make anything outside of the like as there are not enough resources |
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Term
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Definition
In weighing the costs and benefits of a decision, it is important to weigh only the costs and benefits that arise from the decision i.e. from last unit.
For example, when deciding whether to produce additional output, a firm considers only the ADDITIONAL (or marginal) cost, not the sunk cost |
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Term
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Definition
| Costs that cannot be avoided, regardless of what is done in the future, because they have already been incurred. Expenditures to which you have already committed |
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Term
| What are Efficient Markets? |
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Definition
| A market in which profit opportunities are eliminated almost instantaneously |
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