ECO 2013 Chapter 1 - Key Terms (Vocabulary)

Vocabulary flashcards covering core Chapter 1 concepts, definitions, and key terms from the notes.

Economics

A social science concerned with how individuals, institutions, and society make optimal choices under scarcity.

Scarcity

Limited resources relative to unlimited wants, forcing decisions about what to have and what to forgo.

Opportunity Cost

The value (benefits) of the next-best alternative forgone when a choice is made.

Utility

The satisfaction or usefulness derived from a decision or consumption.

Marginal

Extra, additional, or a change in; the effect of a small incremental change.

Marginal Benefit

The additional benefit gained from one more unit or incremental change.

Marginal Cost

The additional cost incurred to produce or obtain one more unit.

Marginal Analysis

Comparison of marginal benefits and marginal costs to guide decisions.

Economic Principle

A generalization about tendencies in economic behavior and how the economy responds to changes.

Ceteris Paribus

Latin for 'all other things equal'; holding other variables constant in analysis.

Aggregates

Macro-level collections (e.g., consumers, business sector, households, government) treated as a single unit.

Macroeconomics

The study of the economy-wide phenomena and aggregates.

Microeconomics

The study of individual units such as persons, households, and firms.

Positive Economics

Focus on facts and what is, describing how the economy actually behaves.

Normative Economics

Focus on what ought to be; judgments about what should be.

Economizing Problem

The issue of choices when wants exceed available income and resources.

Budget Line / Budget Constraint

A curve showing feasible combinations of goods purchasable with a given income; reflects opportunity costs.

Factors of Production

Resources used to produce goods: land, labor, capital, and entrepreneurial ability.

Production Possibility Curve (PPC)

A graph of the maximum feasible combinations of two goods given fixed resources and technology.

Law of Increasing Opportunity Cost

As the output of a good increases, its opportunity cost of production rises because resources are not perfectly adaptable.

Optimal Output

The level of production where marginal benefit equals marginal cost (MB = MC).

MB = MC

A condition for optimal production where the benefit of the last unit equals its cost.

Present Goods

Goods produced for current consumption; choices here affect the position of the PPC outward shift.

Future Goods

Goods produced for future consumption; choices here can yield a larger outward PPC shift.

Presentville

An illustrative economy showing how choosing present goods yields a modest outward shift in the PPC.

Futureville

An illustrative economy showing how choosing future goods yields a greater outward shift in the PPC.

International Trade

Trade across borders that allows specialization and may expand a nation's feasible production and consumption.

Direct Relationship

A positive correlation; as one variable increases, the other tends to increase (upsloping graph).

Inverse Relationship

A negative correlation; as one variable increases, the other tends to decrease (downsloping graph).

Infinite Slope

A vertical slope on a graph; the dependent variable does not change with changes in the independent variable.

Zero Slope

A horizontal slope on a graph; the dependent variable remains constant as the independent variable changes.

Tangent Line

A straight line touching a nonlinear curve at a point, used to estimate the slope there.

Attainable/Unattainable PPC Points

Points inside the PPC are attainable (underemployment possible); points on the curve show full employment; points outside are unattainable with current resources and technology.