Principles of Microeconomics - Key Terms

Flashcards covering key terms from the Principles of Microeconomics lecture notes.

Economics

The study of how people make choices when they can't have everything they want.

Scarcity

There is never enough of something for everyone who wants it; resources are limited.

Opportunity Cost

The value of the BEST thing you gave up when you made a choice.

Trade-off

When getting more of one thing means getting less of another; every choice involves a trade-off.

Market

Any place where buyers and sellers come together to exchange goods or services for money.

Cost-Benefit Principle

Only do something if the benefit is at least as large as the cost; if it's not worth it, don't do it.

Net Benefit

Benefit minus Cost; should be as big and positive as possible when making a decision.

Marginal Thinking

Making decisions one small step at a time, considering if one more unit is worth the extra cost.

Marginal Benefit (MB)

The extra benefit you get from doing one more unit of something.

Marginal Cost (MC)

The extra cost of doing one more unit of something.

Interdependence Principle

Your best choice depends on what others are doing and what other options are available.

Incentive

Anything that makes you more or less likely to do something; can be positive or negative.

Rational Person

Someone who makes choices by logically comparing costs and benefits for the best outcome.

Positive Economics

Statements about what IS — facts about how the economy actually works.

Normative Economics

Statements about what SHOULD BE — opinions and judgments about economic policy.