Econ Chapter 1: Economics - Foundations and Models

Vocabulary flashcards covering fundamental economic concepts, key ideas, market structures, efficiency versus equity, and branches of economics from Chapter 1 notes.

Economics

The study of human behavior, with an emphasis on human decision-making and the choices people make to attain their goals given their scarce resources.

Scarcity

A situation where unlimited wants exceed the limited resources available to fulfill those wants.

Opportunity Cost

The highest-valued alternative that must be given up to engage in an activity.

Marginal Decision Making

Decision making that involves weighing extra or additional costs against additional benefits to make optimal choices.

Centrally Planned Economy

An economy in which the government decides how economic resources will be allocated.

Market Economy

An economy in which the decisions of households and firms interacting in markets allocate economic resources.

Mixed Economy

An economy in which most decisions are made by buyers and sellers in markets, but the government plays a significant role in allocating resources.

Efficiency

A condition achieved when a good or service is produced at the lowest possible cost in accordance with consumer preferences.

Equity

The fair distribution of economic benefits.

Economic Models

Simplified versions of reality used to analyze real-world economic situations.

Positive Economics

An area of economics concerned with "what is," involving statements that can be tested.

Normative Economics

An area of economics concerned with what "should be" or "ought to be," involving statements that cannot be tested.

Microeconomics

The study of how individuals, households, and firms make choices and interact in markets.

Macroeconomics

The study of the economy as a whole.

Secondary Effects

Unintended consequences that result from economic decisions, actions, or policies.