ECO-2023-002 Exam 1
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20 Terms
economics
study of how people manage resources
micro economics
study of how FIRMS and INDIVIDUALS manage resources
macro economics
study of the economy as a whole, how policy makers manage GROWTH and BEHAVIOR of the overall economy
rational behavior
making choices to achieve goals in the most effective way possible
the 4 Q’s of economics
What are the wants and constraints involved? (scarcity)
What are the trade-offs? (opportunity cost & marginal decision making)
How will others respond? (incentives)
Are resources being allocated in the best way possible? (efficiency)
economic def of scarcity
condition of wanting more than we can get with our available resources
every decision in life involves…
weighing the trade off between costs and benefits. (Is it worth giving up one to receive the other?)
opportunity cost
the value to you of what you have to give up in order to get something (value of the next best alternative)
marginal decison making
comparison of additional benefits against the additional cost it would bring without consideration of past choices
sunk cost
cost that has incurred and cannot be recovered or taken back
incentive
something that causes people to behave in a certain way by changing the tradeoffs they face
positive incentive (incentive)
makes people more likely to do something
negative incentive (disincentive)
makes people less likely to do something
efficiency
ensure people get what they most want and need given available resources
when the economy is efficient…
there is no way to reorganize things to make anyone better off without making someone worse off
definition of resource
anything that can be used to make something of value
correlation
when two variables have a consistent relationship
model
simplified representation of a complicated situation
economics is a field of study in which people frequently…
economic analysis most often
seeks to answer questions of cause and effect and evaluates statements that can be tested with data