Chapter 1: An Introduction to the Economic Way of Thinking

Scarcity

occurs when we have fewer resources than we have uses for those resources . '

Economic tools

help us to understand and analyse choices and their implications.

Scarcity

occurs when we have fewer resources than we have uses for those resources . '

Economic tools

help us to understand and analyse choices and their implications.

Decision makers

weigh the costs and benefits associated with any choice in order to maximize the value of some objective.

Macroeconomics deals

with the choices we make as a society, such as how much tax to pay and how many progran1s the government should sponsor.

Utility

is a synonym tor satisfaction or happiness and describes the benefit individuals get from their choices.

Ceteris paribus

is a Latin term that means "all other things remaining constant "or "all else equal ..

data points

By convention, the term "curve "is used to describe the connected , regardless of whether the curve is a straight line or not.

Profit

is the difference between the earnings that a firm receives from selling its good or service and the costs incurred to produce the good or service.

Analysis

of economic choices often involves relaxing the ceteris paribus assumption in a series of steps.

Microeconomics deals

with the choices individuals, households, or businesses make, the decision for both spouses in a family to have paid employment, and the decisions firms make when hiring workers.

Graphs

are visual representations of relationships between two or more variables.

Sunk costs

are irrelevant when making decisions at the margin.

Scarcity

forces us to allocate our scarce resources among the many uses for them, and we have to make choices or trade- offs between these various uses.

Profit

is the benefit that firms get from their choices.

The law of diminishing marginal benefits

as more and more of an activity is done, the marginal benefits derived from the activity lend to diminish

The law of marginal cost

as more and more of an activity is done, the marginal costs of the activity tend to increase