DC Econ Chapter 1 - Textbook

Economics

The study of how people allocate their limited resources to satisfy their unlimited wants.

Microeconomics

The branch of economic analysis that studies decisions made by individuals and firms.

Macroeconomics

The branch of economic analysis that studies the economy as a whole, including phenomena such as national income and unemployment.

Rationality assumption

The assumption that individuals do not intentionally make decisions that would leave them worse off.

Bounded rationality

The hypothesis that people are nearly, but not fully, rational, leading them to use simple rules of thumb in decision making.

Resources

Things used to produce goods and services to satisfy people's wants.

Self-interest

The motivation of individuals to pursue their own goals, which may include wealth, prestige, love, and helping others.

Ceteris paribus

A Latin phrase meaning 'all other things being equal', used to isolate the effects of one variable.

Positive economics

Analysis that focuses on describing and predicting economic phenomena without value judgments.

Normative economics

Analysis that involves value judgments about economic policies and outcomes.

Incentives

Factors that motivate individuals to take a particular action.

Price system

An economic system where prices are determined by decentralized decisions of individuals and firms.

Command and control

An economic system where a centralized authority makes decisions about production and distribution.

Economic model

A simplified representation of reality used to predict and analyze economic phenomena.

Behavioral economics

The study of how psychological factors affect economic decision making.

Enlightened self-interest

The idea that individuals can serve their own interests while also benefiting others.

Market system

An economic system that answers economic questions through decentralized decision making and the price mechanism.

Mixed economic systems

Economic systems that incorporate elements of both centralized command and control and decentralized price systems.

Three Basic Economic Questions

What and how much to produce, how to produce it, and for whom to produce.

Rules of thumb

Simplified decision-making strategies used by individuals when they cannot consider every possible choice.

Technological developments

Advancements that impact the interplay between microeconomics and macroeconomics.

Artificial intelligence (AI)

Technologies that enhance decision-making processes through data analysis, often affecting economic choices.

Economic analysis

The systematic study of how economic agents make decisions based on self-interest and incentives.