ECON 103 EXAM 1

Net benefit

The benefit received from paying less for a good than the maximum amount that the person is willing to pay for it

Trade-offs

Occurs when some benefits must be given up in order to gain others

Negative externality

Occur when an economic activity has a spillover cost that doesnt affect those directly engaged in the activity (pollution)

Postive externality

beneficial side effect that affects an uninvolved third party

Marginal Analysis

A cost-benefit calculation that studies the difference between a feasible alternative and the next feasible alternative

Normative Economics

Analysis that describes what people ought to do (Subjective)

Marginal Cost

The extra cost created by moving from one feasible alternative to the next feasible alternative.

Economic Agent

An individual or a group that makes choices

Opportunity Cost

The best alternate activity or use of a resource

Model

Is simplified representation of the world (can be referred to as a "theory")

Hypothesis

A prediction, typically generated by a model that can be tested with data

Economics

The study of people's choices

Micro-economics

Is the study of how individuals, households, firms, and govts make choices, and how those choices affect prices, the allocation of resources, and the well-being of other agents

Macro-economics

The study of the economy as a whole (growth-rate, inflation rate, unemployment rate)

Marketplace

Anywhere that goods and services are exchanged.

Theory

Interchangeable with "model"

Optimization

Trying to choose the best feasible option, given the available information

Postive Economics

Analysis that describes what people actually do (Objective)

Total Cost

The total economic cost of production (Fixed Costs + Variable Costs)

Empiricism

Analysis that uses Data/Evidence to support it

Postive Correlation

Two variables tend to move in the same direction

Negative/Zero Correlation

Two variables tend to move in opposite directions

Free-Rider Problem

Members of a group who benefit from others' investments yet don't contribute themselves