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Economics
the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society
Scarcity
the goods available are too few to satisfy individuals’ desires
Microeconomics
the study of individual choice, and how that choice is influenced by economic forces
Macroeconomics
the study of the economy as a whole
Marginal cost
the additional cost over and above costs already incurred
Marginal benefit
the additional benefit above what has already derived
Economic reasoning
based on the premise that everything has a cost
MB > MC
do it!
MC > MB
don’t do it!
Opportunity cost
the benefit that you might have gained from choosing the next-best alternative
Implicit costs
costs associated with a decision that often are not included in normal accounting costs
Illusionary sunk costs
costs that show up in financial accounts that are already spent
A market force
an economic force that is given relatively free rein by society to work through the market
The invisible hand
the price mechanism that guides our actions in a market. is an example of a market force
An economic model
a framework that places the generalized insights of the theory in a more specific contextual setting
An economic principle
a commonly held insight stated as a law or general assumption
Theorems
propositions that are logically true based on the assumptions of the model
Arrive at policy precepts
policy rules that conclude that a particular course of action is preferable
Efficiency
achieving a goal as cheaply as possible
Economic institutions
laws, common practices, and organizations in a society that affect the economy
Economic policies
actions (or inaction) taken by the government to influence economic actions
Objective policy analysis
keeps value judgments separate from the analysis
Subjective policy analysis
reflects the analyst’s views of how things should be
Positive economics
the study of what is and how the economy works
Normative economics
the study of what the goals of the economy should be
The art of economics
using the knowledge of positive economics to achieve the goals determined in normative economics
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