Economic Way of Thinking Vocabulary

Cost-Benefit Analysis - Weighing the costs and benefits to see which action is worth doing

Margin - The border or outer edge of something

Marginal Cost - What is given up by adding one more unit to an activity

Incentive - Something that motivates you to take a particular course of action

Market - An arrangement that brings buyers and sellers together to do business with each other

Law of Unintended Consequences - actions of people and governments always have effects that are not expected or intended

Marginal Benefit - What is gained by adding one more unit to an activity

Economics - The study of how people choose to use their limited resources to satisfy their unlimited wants.

Economy - A system used to manage limited resources for the production, distribution, and consumption of goods and services.

Resource - Anything used to produce an economic good or service.

Positive Economics - A type of economics that uses objective analysis to find out how the economy actually works.

Normative Economics - A type of economics that applies value judgements to data in order to recommend actions or policies.

Scarcity - the condition that results because we have limited resources but unlimited wants

Tradeoff - The exchange of one benefit or advantage for another that is thought to be better

Scarcity-Forces-Tradeoff Principle - The idea that limited resources force people to make choices and force tradeoffs when they choose

Costs - What you spend in money, effort, or other sacrifices

Benefits - What is gained from something in money or other improvements