Introduction to Economics and the Economy

Vocabulary flashcards covering key terms from the lecture notes on scarcity, opportunity cost, rational behavior, micro/macro economics, and fundamental concepts.

Scarcity

A condition in which economic resources are limited relative to wants, forcing choices and trade-offs.

Opportunity Cost

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

Rational self-interest

Behavior in which individuals and institutions pursue opportunities to increase their own utility, weighing costs and benefits.

Utility

The satisfaction, happiness, or usefulness obtained from consuming a good or service.

Purposeful behavior

Decision making guided by a desired outcome; rational, but not perfect or emotion-free.

Marginal Analysis

The examination of marginal benefits and marginal costs to guide decisions.

Marginal Benefit

The extra benefit obtained from consuming one more unit of a good or service.

Marginal Cost

The extra cost incurred from producing or consuming one more unit.

Positive Economics

Focus on facts and cause-and-effect relationships without value judgments.

Normative Economics

Involves value judgments about what the economy should be like or what policies should be recommended.

Microeconomics

Study of individual decision-makers—consumers, workers, and firms—and their behavior.

Macroeconomics

Study of the economy as a whole, including growth, unemployment, inflation, and major aggregates.

Aggregate

A collection of individual economic units treated as a single unit (e.g., all consumers).

Budget Line / Budget Constraint

A line showing the combinations of two goods a consumer can buy with a given income and prices.

Attainable Combinations

All combinations on or inside the budget line that can be purchased with current income.

Unattainable Combinations

Combinations outside the budget line that exceed current income.

Trade-off

Giving up one thing to obtain another due to limited resources.

Slope of the Budget Line

The rate at which one good must be sacrificed to obtain more of another; equal to the negative price ratio.

Generalizations

Principles describing typical tendencies for consumers or firms, with exceptions possible.

Ceteris Paribus / Other-things-equal

Assumption that all other factors remain constant while analyzing a specific relationship.

Theories, Principles, and Models

Tools of economic analysis: simplified explanations that help predict outcomes; can evolve into laws.

Economic Law / Economic Principle

A well-tested generalization that enables prediction of probable effects of actions.

Model

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