CHAPTER ONE: SCOPE AND BASIC CONCEPTS IN ECONOMICS

These flashcards cover the fundamental concepts and definitions in economics as presented in the lecture notes.

Economics

The study of how societies manage scarce resources.

Wealth of Nations

Defined by Adam Smith as an inquiry into the nature and causes of the wealth of nations.

Scarcity

A situation where resources are limited in supply relative to human wants.

Economic Welfare

The standard of living or well-being of individuals, often measured by the level of comfort and wealth.

Utility

The level of satisfaction a consumer derives from consuming goods and services.

Microeconomics

The branch of economics focusing on individual units like consumers and firms.

Macroeconomics

The branch of economics studying the economy as a whole, including issues like unemployment and inflation.

Choice

The rational selection of one alternative over others due to scarcity of resources.

Optimization

The best allocation of resources to achieve maximum satisfaction.

Production Possibilities Frontier (PPF)

A graph that illustrates the potential output combinations of two goods that can be produced with available resources.

Indifference Curve

A graph showing combinations of two goods that give the consumer equal satisfaction.

Marginal Utility

The additional satisfaction gained from consuming one more unit of a good.

Opportunity Cost

The value of the best alternative forgone when making a decision.

Cardinal Utility Theory

A theory which assumes utility can be measured numerically.

Ordinal Utility Theory

A theory which assumes utility can only be ranked or ordered.

Ceteris Paribus

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

Positive Economics

Descriptive and objective analysis that describes how the economy works.

Normative Economics

Prescriptive analysis that makes value judgments about economic fairness and outcomes.