The Scope and Method of Economics

A comprehensive set of flashcards focusing on key vocabulary and concepts covered in the lecture on economics.

Economics

The study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided.

Scarcity

A situation in which resources are limited and cannot meet all human wants.

Opportunity Cost

The best alternative that we forgo when we make a choice.

Marginalism

The process of analyzing the additional or incremental costs or benefits arising from a choice or decision.

Efficient Markets

Markets where profit opportunities are eliminated almost instantaneously.

Microeconomics

The branch of economics that examines the functioning of individual industries and the behavior of individual units such as firms and households.

Macroeconomics

The branch of economics that examines the economic behavior of aggregates on a national scale.

Positive Economics

An approach to economics that seeks to understand behavior and the operation of systems without making judgments.

Normative Economics

An approach to economics that evaluates economic outcomes as good or bad and may prescribe courses of action.

Ceteris Paribus

A device used to analyze the relationship between two variables while keeping other variables unchanged.

Trade-offs

The concept that taking one action usually means giving up something else.

Efficient Economy

An economy that produces what people want at the least possible cost.

Equity

A concept meaning fairness, which is difficult to define universally.

Economic Growth

An increase in total output of an economy, often defined as an increase in output per capita.

Stability

A condition in which national output is growing steadily with low inflation and full employment of resources.

Theories

Formal statements of presumed relationships between two or more variables.

Models

Formal representations of theories used in economics to illustrate relationships.

Ockham’s Razor

The principle that irrelevant detail should be cut away, preferring simpler explanations.

Correlation

A statistical measure indicating the degree to which two variables move in relation to one another.

Post hoc fallacy

The incorrect belief that because one event follows another, the first event caused the second.

Industrial Revolution

A period of great technological and industrial change that occurred during the late 18th and early 19th centuries.

E-revolution

The shift in economic activities and business practices brought about by the rise of the Internet.

Four Goals of Economic Policy

Efficiency, equity, growth, and stability.

Bureau of Labor Statistics (BLS)

A principal fact-finding agency for the Federal Government in the broad field of Labor Economics.

Federal Reserve

The central bank of the United States, which conducts the nation's monetary policy.

Income Effect

The change in consumption resulting from a change in real income.

Substitution Effect

The change in consumption caused by a change in the relative price of goods.

Market-driven Miracle

The process by which individual self-interest leads to positive outcomes for society.

Normative Points

Points of disagreement among economists that are based on opinion and values.

Graphical Representation

The use of charts and graphs to depict data and economic relationships.

Data Sources

Web resources where data about the economy can be accessed, like the World Bank and IMF.

Causal Inference

The process of establishing a cause-effect relationship between variables.

Cautious Analysis

Carefully considering potential errors in causal assumptions before drawing conclusions.

Variables

Measures that can change from time to time or observation to observation.

Alleviation of Pitfalls

Strategies used to avoid common errors in economic reasoning.

Resource Allocation

The distribution of resources among competing groups or uses.

Entrepreneurs

Individuals who start new businesses, risking their own money to innovate and earn profits.

Public Policy

Decisions made by the government in relation to economic issues such as education and health care.

Causal Relationship

A relationship where a change in one variable directly causes a change in another.

Economic Analysis

The systematic evaluation of economic systems and decisions based on quantitative data.

Efficiency vs. Equity

The tension in economic policy between making the best use of resources and ensuring fair distribution.