MACRO QUIZ 1 VOCAB

chap 1 and 2 vocab

individual choice

uh free will ig

resource

anything that can be used to produce something else

scarce / scarcity

there’s not enough of a resource available to satisfy all the ways a society wants to use it - this means society needs to make choices

opportunity cost

what you must give up in order to get an item - that’s an items true cost, its forgoing some other alternative

trade off

comparison of cost and benefits

marginal decisions

whether to do a bit more or bit less of an activity (what to do with ur next hour, dollar, etc)

marginal analysis

study of these “how much” decisions (how much of an activity to do)

incentive

opportunity to make urself better off

interaction

my choices affect ur choices and vice versa

trade

a person provides a good or service that other people want in return for diff goods or services they want - creates benefit so two ppl can each get more of what they want

specialization

diff ppl engage in a diff task focusing on what they’re good at - optimizes diff skillsets

equilibrium

indiv cannot make themselves better off by doing smth diff (ex: all checkout lines are the same length)

efficient (economy)

takes all opportunities to make some ppl better off without making other ppl worse off

equity

issues of fairness

model

simplified representation of reality used to better understand real-life situations

other things equal assumption

important assumption that all other relevant factors remain unchanged - imp for building economic models

production possibility frontier

simplification of trade-offs by showing maximum of one good given the quantity of the other good produced

factors of production

resources used to produce goods and services, usually used to reference a resource not used up in production - helps push out the production possibility frontier

technology

technical means for the production of goods and services - helps push out the production possibility frontier

comparative advantage

opportunity cost of production is lower than that of other countries

absolute advantage

country / indiv can produce more output per worker than other countries / indivs

barter

one party directly trades a good or service for another good or service without using money

circular flow diagram

shows flow of money and goods/services in the economy

household

indiv or group of ppl that share an income (not necessarily a family) - one of 2 inhabitants in simplest circular flow diagram

firm

organization that produces goods and services for sale and employs members of households - one of 2 inhabitants in simplest circular flow diagram

market for goods and services

households buy the goods and services they want from firms - this produces a flow of goods and services to households and a return flow of money to firms

factor markets

firms buy the resources they need to produce goods and services

income distribution

how total income created in an economy is allocated between less skilled workers, highly skilled workers, and the owners of capital and land

positive econmics

definite right and wrong answers for the way the world works (description)

normative economics

answer how the world should work (prescription)

forecast

prediction

market failure

a market left on its own fails to allocate resources efficiently - ex: green businesses are less profitable

externality

impact of one’s actions on the well-being of a bystander