Mod 1 - The Study of Economics

economics - the study of scarcity and choice.

individual choice - decisions by individuals about what to do, which necessarily involve decisions about what not to do.

economy - a system for coordinating a society's productive and consumptive activities.

market economy - an economy in which the decisions of individual producers and consumers largely determine what, how, and for whom to produce, with little government involvement in the decisions.

command economy - an economy in which industry is publicly owned and a central authority makes production and consumption decisions.

incentives - rewards or punishments that motivate particular choices.

property rights - establish ownership and grant individuals the right to trade goods and services with each other.

marginal analysis - the study of the costs and benefits of doing alittle bit more of an activity versus a little bit less.

resource - anything that can be used to produce something else. land - all resources that come from nature, such as minerals, timber, and petroleum.

labor - the effort of workers.

capital - manufactured goods used to make other goods and services; also called "physical capital."

entrepreneurship - the efforts of entrepreneurs in organizing resources for production, taking risks to create new enterprises, and innovating to develop new products and production processes.

scarce - in short supply; when a resource is not available in sufficient quantities to satisfy all the various ways a society wants to use it.

opportunity cost - the real cost of an item: the value of the next best alternative that you must give up in order to get that item.

microeconomics - the branch of economics that studies how individuals, households, and firms make decisions and how those decisions interact.

macroeconomics - the branch of economics that is concerned with the overall ups and downs of the economy.

economic aggregates - economic measures that summarize data across many different markets.

positive economics - the branch of economic analysis that describes the way the economy actually works.

normative economics - the branch of economic analysis that makes prescriptions about the way the economy should work.