Microeconomics: General Introduction, Rationality, and Opportunity Cost

Vocabulary flashcards covering the core concepts of Chapter 1 of Microeconomics, including economic agents, rationality, economic choice, and opportunity cost.

Microeconomics

The branch of economic science that studies how individuals and firms make their decisions, as well as their interactions in markets.

Scarcity of Resources

The condition where available resources are limited while human needs are unlimited, requiring society to allocate resources among different uses.

Choices Under Constraints

The trade-offs that each economic actor must make while taking into account limitations such as income, costs, available resources, and prices.

Consumer

Any actor (individual, family, or organization) who uses goods and services to satisfy their needs.

Consumer Objective

The goal of maximizing satisfaction by selecting goods and services that best align with preferences, disposable income, prices, needs, and priorities.

Enterprise (Firm)

A production entity that combines different factors of production to produce goods and services intended to be sold on a market.

Profit Maximization

The primary objective of a firm, defined by the formula: $\text{Profit} = \text{Revenues} - \text{Expenses}$.

Economic Rationality

The hypothesis that economic actors make decisions coherently by seeking to best achieve their objectives, given available information and constraints.

Imperfect Information

A limitation of rationality where an individual does not possess all the necessary information to make an optimal choice.

Limited Capacities

A limitation of rationality where an individual cannot analyze all available possibilities.

Psychological Factors (in Decision-Making)

Influences such as habits, emotions, and social behaviors that affect individual decisions and limit pure economic rationality.

Economic Choice

A decision made between multiple alternatives in order to achieve an objective.

Renunciation (Trade-off)

A key characteristic of an economic choice whereby choosing one possibility necessarily means giving up the other available alternatives.

Opportunity Cost

The value of the best alternative forgone when making a choice, representing the lost benefit, advantage, or satisfaction.

Best Forgone Alternative

The specific alternative used to determine opportunity cost, taking into account only the single best unchosen option rather than all discarded possibilities.

Non-Monetary Cost

An economic cost tied to renunciation that is not a financial disbursement, such as forgone time, satisfaction, or lost advantage.