MACROECONOMICS: What Is Economics?

Flashcards covering core concepts of economics, microeconomics, macroeconomics, factors of production, economic decision-making, and graphical analysis from the lecture notes.

Scarcity

Our inability to satisfy all our wants because we want more than we can get.

Incentive

A reward that encourages an action or a penalty that discourages an action.

Economics

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.

Microeconomics

The study of choices that individuals and businesses make, the way those choices interact in markets, and the influence of governments.

Macroeconomics

The study of the performance of the national and global economies.

Goods and services

The objects that people value and produce to satisfy human wants.

Factors of production

Productive resources used to produce goods and services, grouped into land, labor, capital, and entrepreneurship.

Land

The 'gifts of nature' that we use to produce goods and services.

Labor

The work time and work effort that people devote to producing goods and services.

Human capital

The knowledge and skill that people obtain from education, on-the-job training, and work experience, which affects the quality of labor.

Capital

The tools, instruments, machines, buildings, and other constructions that businesses use to produce goods and services.

Entrepreneurship

The human resource that organizes land, labor, and capital.

Rent

The income earned by land.

Wages

The income earned by labor.

Interest

The income earned by capital.

Profit

The income earned by entrepreneurship.

Self-interest

Choices that an individual thinks are best for themselves.

Social interest

Choices that are best for society as a whole, comprising efficiency and fair shares.

Efficiency (in social interest)

Resource use is efficient if it is not possible to make someone better off without making someone else worse off.

Globalization

The expansion of international trade, borrowing and lending, and investment.

Tradeoff

An exchange; giving up one thing to get something else, central to every economic choice.

Rational choice

A choice that compares costs and benefits and achieves the greatest benefit over cost for the person making the choice.

Benefit

The gain or pleasure that something brings, determined by preferences.

Preferences

What a person likes and dislikes and the intensity of those feelings.

Opportunity cost

The highest-valued alternative that must be given up to get something.

Marginal benefit

The benefit from pursuing an incremental increase in an activity.

Marginal cost

The opportunity cost of pursuing an incremental increase in an activity.

Positive statement

A statement that can be tested by checking it against facts.

Normative statement

A statement that expresses an opinion and cannot be tested.

Economic model

A description of some aspect of the economic world that includes only those features that are needed for the purpose at hand.

Scatter diagram

A graph that plots the value of one variable against the value of another variable for a number of different values, revealing whether a relationship exists.

Positive relationship (Direct relationship)

A relationship between two variables that move in the same direction, shown by an upward-sloping line.

Negative relationship (Inverse relationship)

A relationship between two variables that move in opposite directions, shown by a downward-sloping line.

Slope of a relationship

The change in the value of the variable measured on the y-axis divided by the change in the value of the variable measured on the x-axis (Δy/Δx).

Ceteris paribus

A Latin phrase meaning 'if all other relevant things remain the same,' used to plot a relationship between two variables while holding others constant.