Krugman & Wells Microeconomics Chapter 1

economy

a system for coordinating society's productive activities

economics

the social science that studies the production, distribution, and consumption of goods and services

market economy

a system in which decisions about production and consumption are made by individual producers and consumers

invisible hand

the way in which the individual pursuit of self-interest can lead to good results for society as a whole

microeconomics

the branch of study that examines how people make decisions and how these decisions interact

market failure

a situation wherein the individual pursuit of self-interest leads to band results for the society as a whole

recession

a downturn in the economy

macroeconomics

the branch of study that is concerned with overall ups and downs in the economy

economic growth

the growing ability to produce goods and services

individual choice

the decision by an individual of what to do, which necessarily involves a decision of what not to do

resource

anything that can be used to produce something else

scarce

a state in which not enough of the resources are available to satisfy all the various ways a society wants to use them

opportunity cost

the real cost of an item; what you must give up in order to get it

marginal decisions

the choices about whether to do a little bit more or a little bit less of an activity

marginal analysis

the study of decisions made at the margin

incentive

anything that offers rewards to people who change their behavior

interaction of choices

the concept that the choices of any individual affect the choices of other individuals, which is a feature of most economic situations

trade

the system in which individuals provide goods and services to others and receive goods and services in return

gains from trade

the concept that people can get more of what they want through trade than they could if they tried to be self-sufficient

specialization

the system of people practicing the task that he or she is good at performing

equilibrium

an economic situation in which no individual would be better off doing something different

efficient

a state in which an economy takes all opportunities to make some people better off without making other people worse off

equity

a state in which everyone gets her or his fair share