Introduction to Economics Flashcards

Vocabulary flashcards based on Chapters 1 through 4 of the introductory economics lecture notes.

Economics

The study of how rational individuals allocate scarce resources in order to satisfy unlimited wants, or the study of choice.

Economy (Etymology)

Derived from the Greek word for one who manages a household.

Scarcity

The condition of having to choose among alternatives.

Scarce good

A good for which the choice of one alternative requires that another be given up.

Free good

A good for which the choice of one use does not require that another be given up, such as gravity or sunlight.

Economy

An organization that produces goods and services and then allocates them to people for use.

Fundamental economic questions

The three questions an economy must answer: What should be produced? How should goods and services be produced? For whom should goods and services be produced?

Opportunity cost

The value of the best alternative for Ghanan making any choice.

Choice at the margin

A decision to do a little more or a little less of something.

Margin

The current level of inactivity.

Microeconomics

The branch of economics that focuses on the choices made by consumers and firms and the impacts those choices have on individual markets.

Macroeconomics

The branch of economics that focuses on the impact of choices on the total or aggregate level of economy activity.

Model

A set of simplifying assumptions about some aspect to understand the economy and help generate hypotheses about the economy.

Dependent variable

A variable that responds to a change.

Independent variable

A variable that induces a change.

Ceterus paribus

A Latin phrase that means all things unchanged.

Fallacy of false cause

Reaching the incorrect conclusion that one event causes another because the two events tend to occur together.

Positive statement

A statement of fact or a hypothesis that is testable.

Normative statement

A statement that makes a value judgment.