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