Econ 1102 - Introductory Microeconomics - Chapter 1: Economic Foundations & Model

Microeconomics

Study of individual agents (consumers, producers, government).

Macroeconomics

Study of the economy as a whole (unemployment, inflation, GDP).

Opportunity Cost

The cost of giving up something when making tradeoffs.

Marginal Cost (MC)

Additional cost of a small amount extra of some action.

Marginal Benefit (MB)

Additional benefit of a small amount extra of some action.

Market

Group of buyers and sellers trading a good or service.

Centrally Planned Economy

An economy where the government allocates resources.

Market Economy

An economy where households and firms allocate resources through markets.

Mixed Economy

An economy where most decisions result from market interactions, but the government plays a significant role.

Market Failure

Inefficient allocation of resources where market outcomes are not optimal.

Positive Statement

Describes the world as it is; can be tested with data.

Normative Statement

Describes what ought to be; involves value judgments.

Equity

Fair distribution of economic benefits.

Efficiency

Society gets the most from scarce resources.