the branch of economics that studies how individuals, households, and firms make decisions and how those decisions interact
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macroeconomic
the branch of economics that is concerned with the overall ups and downs of the economy
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opportunity cost
the value of the next best alternative that you must give up in order to get an item
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trade-offs
when you give up something to have something else
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marginal analysis
the study of the costs and benefits of doing a little bit more of an activity vs a little bit less
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property rights
establish ownership and grant individuals the right to trade goods and services with each other
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business cycle
the alternation between economic downturns and economic upturns
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gains for trade
people can get more of what they want through trade than they could if they try to be self-sufficient; this increase in output is due to specialization
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price stability
when the overall price level is changing only slowly if at all
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labor force
number of people who are either currently holding a job in the economy or are actively looking for work but aren’t currently employed; the sun of employment and unemployment
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efficient
economy in which there is no way to make anyone better off without making at least one person worst off
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economics
the study of scarcity and choices
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capitol
manufactured goods used to make other goods and services
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land
all resources come from nature
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labor
the effort of workers
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recession
period of economic downturn when output and employment are falling
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expansions
period of economic upturn in which our and employee rising
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depression
very deep and prolonged economic downturn
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employment
number of people who are currently working for pay in the economy
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trade
individuals provide goods and service to others and receive goods and services in returns
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aggregate output
the economy’s total production of goods and services for a given time period
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production possibilities curve
illustrated the trade-offs facing an economy that produces only two goods; shows the maximum quantity of one good that can be produced for each possible quantity of the other good produced
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economic aggregates
economic measures that summarize data across many different matkets
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unemployment rate
percentage of the labor force that’s unemployed
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productive efficiency
achieved by an economy if it produces at a point on its production possibilities curve
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comparative advantage
conferred by an individual if the opportunity cost of product info the good or service is lower for that individual than for other people
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allocative efficiency
an economy produces at the point along its production possibilities curve that makes consumers as well off as possible
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absolute advantage
the ability to produce more of a good or service with a given amount of time and resources
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inflation
rising overall price level
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entrepreneurship
organizing resources for production, taking risks to create new enterprises, and innovating to develop new products and production processes
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command economy
industry is public ally owned and a central authority makes production and consumption decisions
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incentives
rewards or punishments that motivate particular choices
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market economy
decisions of individual producers and consumers largely determine what, how, and for whom to produce, with little government involvement in the decisions
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economic growth
increase in the maximum amount of goods and service an economy can produce
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terms of trade
indicate the rate at which one good can be exchanged for another
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specialization
situation in which each person specializes in the task that they’re good at performing
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unemployment
number of people who are actively looking for work but aren’t currently employed
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deflation
falling overall price level
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factors of production
land, labor, capitol, entrepreneurship
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scarcity
society does not have enough resources to produce whatever everyone needs and wants. basically, it is unlimited wants and needs vs. limited resources
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resource
anything that can be used to produce something else
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cost-benefit analysis
technique used to evaluate the potential costs and benefits of a proposed project or policy
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adam smith
father of capitalism, wrote “wealth of the nation”
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economic model
a simplified description of reality, designed to yield hypotheses about economic behavior that can be tested
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