Econ Unit 1

Economics

The study of scarcity and choice 

Individual choice

The decisions by individuals about what to do and what not to do

Economy

system that coordinates choices about production with choices about consumption and distributes goods and services to the people who want them

Market Economy

individual producers and consumers decide what how, and for whom to produce

Command Economy

industry is publicly owned, and a central authority makes production and consumption decisions

Incentives

rewards or punishments that motivate particular choices

Property rights

establish ownership and grant individuals the right to trade goods and services with each other

Marginal Analysis

 the study of the costs and benefits of doing a little more of an activity versus a little less

Resource

Anything that can be used to produce something else

Land

All natural resources

Labor

the effort of the workers

capital

all manufactured resources

Entrepreneurship

risk-taking, innovation, and organization

Scarce

when there is not enough of it available to satisfy the various ways a society wants to use it

Opportunity cost

the best thing you could give up

Microeconomics

the study of how individuals, households, and firms make decisions and how these decisions interact

Macroeconomics

concerned with the behavior of the economy as a whole; therefore, it focuses on economic aggregates

Economic Aggregates

economic measures

 Positive Economics

the branch of economic analysis that describes the way the economy actually works

Normative economics

makes prescriptions about the way the economy should work

Trade-off

you give up one thing to get something else

Production Possibilities Curve

shows trade-offs facing an economy that produces two goods; shows the maximum quantity of one good that can be produced for each possible quantity of the other good

Efficient

describes a market or economy in which there is no way to make anyone better off without making at least one person worse off. 

Productive Efficiency

 if it produces at a point on its PPC

Allocative Efficiency

if it produces at the point along its PPC that makes consumers as well off as possible 

Trade

they provide goods and services to others and receive goods and services in return

Specialization

situation in which each person specializes in the task that he or she is good at performing

Absolute advantage

they can make more of it with a given amount of time and resources

Comparative advantage

producing a good or service if they faced the lowest opportunity cost of producing it

Circular flow Diagram

a visual model of that economy that shows how dollars and resources flow through markets among households and firms

Household

a person or group of people who share income

Firm

an organization that produces goods and services for sale

Product markets

where goods and services are bought and sold

Consumer spending

household spending on goods and services

Factor markets

where resources, especially capital and labor, are bought and sold