Micro intro

Capital

The factories, machines, tools, and inventories in an economy.

Decision-making rule

If the additional benefits (correctly measured) are greater than the additional costs incurred (correctly measured), go for it. If the additional costs are greater than the additional benefits, do not do it.

Economic resources

Labor, capital, and natural resources that can be used to produce goods and services.

Fixed costs

Costs that do not change as a result of a decision.

Labor force

those with a job and those who want a job but don't have one.

Macroeconomics

The study of the economy as a whole. Unemployment, inflation, economic growth, and related economic policies are central topics.

Marginal benefit

The increase in benefits resulting from an action. Or the increase in benefits resulting from producing one more unit of output.

Marginal cost

The increase in costs resulting from an action or from producing one more unit of output.

Markets

Methods through which buyers and sellers come together and determine the prices and quantities of goods and services that will be exchanged.

Microeconomics

The study of markets and their consequences, choices made by consumers and firms, and the role of government in influencing the outcomes of markets.

Opportunity cost

The value of the best-forgone alternative. The true cost of making a choice is the value of what is given up as a result of that choice.

Rational decision making

The process of comparing the marginal benefits and marginal costs of an action. If the marginal benefits are greater than the marginal costs, a rational decision is to undertake the action.

Scarcity

Our wants are greater than our abilities to satisfy them. This necessitates making choices about how we use our resources.

Sunk cost

A cost that has already been paid and cannot be recovered.