Macroeconomics

Opportunity Cost

What you must give up to get something.

Marginal Analysis

The study of marginal decisions, focusing on incremental changes.

Economic Incentive

Encourages a certain behavior, often offering rewards to change behavior.

Economic Disincentive

Discourages a certain behavior, typically by increasing costs or reducing benefits.

Positive Statement

A statement about how the world is, with no bias or opinion.

Normative Statement

A statement about how the world should be, expressing opinions or judgments.

Efficiency

The opportunity to make some people better off without worsening others.

Equity

Making life fairer for all individuals, ensuring fairness.

Theory

A proposal or representation explaining how variables in the economy impact one another.

Model

A simplified representation of real situations used to understand them better.

Ceteris Paribus

Translated as 'other things held constant', used to isolate impact of one variable.

Endogenous Variable

A variable that is inside or within our economic model.

Exogenous Variable

A variable that is outside our economic model.

Factors of Production

Four categories: Land, Capital, Labor, Entrepreneurial Ability.

Entrepreneur

A risk-taker/inventor/business owner who manages their own firm.

Production Possibilities Frontier

A curve representing the maximum quantity of one product compared to another.

Constant Opportunity Costs

Resources are perfectly adaptable, resulting in a straight-line production possibilities frontier.

Increasing Opportunity Costs

Resources are not perfectly adaptable, reflecting a concave production possibilities frontier.

Interior Point

A point indicating underutilization of resources and inefficiency.

Exterior Point

An unattainable point beyond current production capabilities.

Capital Good

Physical, man-made assets businesses use to produce other goods.

Consumer Good

Products purchased for personal use, not for business.

Outward Shift of Production Possibilities Frontier

Indicates increased productive capacity of the economy.

Inward Shift of Production Possibilities Frontier

Indicates decreased productive capacity due to factors like natural disasters.

Impact of Capital vs. Consumer Goods

Investments in capital goods typically lead to economic growth.