DC Econ Chapter 1

Economics

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

Microeconomics

The study of decision making undertaken by individuals (or households) and by firms.

Macroeconomics

The study of the behavior of the economy as a whole, dealing with economy-wide phenomena.

Incentives

Rewards for engaging in a particular activity that influence decision making.

Rational self-interest

The assumption that individuals act motivated by self-interest and respond predictably to opportunities for gain.

Positive economics

Descriptive statements or scientific predictions about economic phenomena.

Normative economics

Analysis involving value judgments about what ought to be.

Ceteris paribus

A Latin phrase meaning 'other things constant' used in economic modeling.

Economic system

The institutional mechanism that determines how scarce resources are utilized to satisfy human wants.

Behavioral economics

An approach to the study of consumer behavior emphasizing psychological limitations that interfere with rational decision making.

Bounded rationality

The hypothesis that people are nearly, but not fully, rational, often relying on rules of thumb to make decisions.

Direct relationship

A relationship where an increase in one variable leads to an increase in another.

Inverse relationship

A relationship where an increase in one variable leads to a decrease in another.

Models

Simplified representations of reality used to analyze economic phenomena.

Economic questions

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

Artificial Intelligence (AI)

Technologies that utilize automated data-analytics techniques to assist in decision making.

Resources

Things that have value and are used to produce goods and services.