Thinking Like an Economist

A collection of vocabulary flashcards summarizing key concepts from the lecture on economics and decision-making.

Economics

The study of how people make choices under scarcity and the results of these choices for society.

Scarcity

The limited nature of resources, necessitating trade-offs when choosing to allocate them.

Cost-Benefit Principle

An action should be taken if, and only if, its benefit is at least as great as its cost.

Economic Surplus

The economic surplus of an action is equal to its total benefits minus its total costs.

Opportunity Cost

The value of what must be foregone in order to undertake an activity.

Marginal Analysis

The examination of the additional benefits of an activity compared to the additional costs incurred by that same activity.

Normative Economics

Economic principles that describe how people should behave.

Positive Economics

Economic principles that predict how people will behave.

Incentive Principle

The idea that incentives influence people's choices and actions.

Microeconomics

The study of individual choices and their implications for price and quantity in specific markets.

Macroeconomics

The study of the performance of national economies and the policies that governments use to improve economic performance.

Implicit Costs

Costs that represent the value of the next best alternative that is forgone when a choice is made.

Sunk Costs

Costs that have already been incurred and cannot be recovered.