Introduction to Microeconomics - Chapter 1

Flashcards covering key vocabulary and concepts from Chapter 1: Introduction to Microeconomics.

Good

Anything that gives a person utility, or satisfaction (ex: laptop, TV, chocolate,…).

Bad

Something that gives a person disutility, or dissatisfaction (ex: flu, cigarette,…).

Resources (Economics)

Inputs used in production, divided into land, labor, capital, and entrepreneurship.

Land (Resource)

All natural resources such as minerals, forests, water, and unimproved land.

Labor (Resource)

The physical and mental talents that people contribute to the production process.

Capital (Resource)

Produced goods that can be used as inputs for further productions (ex: machinery, computers, buildings,…).

Entrepreneurship (Resource)

The talent for organizing the resources of land, labor and capital to produce goods, seek new opportunities, and develop new ways of doing things.

Scarcity

The condition in which our wants are greater than the limited resources.

Economics

The science of scarcity; the science of how individuals and societies deal with the fact that wants are greater than the limited resources available to satisfy those wants.

Opportunity Cost

The cost of selecting one choice over another; or what you give up to do something else.

Marginal (Economics)

A synonym for additional, referring to additional costs and benefits in decision-making.

Efficiency (Economics)

The optimal amount of anything, achieved when marginal benefits equal marginal costs (MC = MB).

Incentive

Something that encourages or motivates a person to undertake an action, often related to expected net benefits.

Exchange (Trade)

The giving up of one thing for something else.

Ceteris Paribus

A Latin phrase meaning 'holding other things constant' or 'all else being equal,' used to isolate the effect of one economic variable.

Normative Economics

Focuses on the value of economic fairness or what the economy 'should be' or 'ought to be,' based on subjective and value-based perspectives.

Positive Economics

Describes and explains various economic phenomena or the 'what is' scenario, based on objective and fact-based statements that can be measured.

Microeconomics

The branch of economics that deals with human behavior and choices of individuals and firms on a micro level.

Macroeconomics

The branch of economics that deals with human behavior and choices within countries and between countries on a macro level.

Directly Related (Variables)

Describes variables (e.g., X and Y) that move in the same direction, meaning if X rises, Y also rises, and vice versa.

Inversely Related (Variables)

Describes variables (e.g., X and Y) that move in opposite directions, meaning if X rises, Y falls, and vice versa.

Marginal Revenue (MR)

The change in total revenue divided by the change in quantity.

Marginal Cost (MC)

The change in total cost divided by the change in quantity.