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| the condition in which are wants are greater then the limited resources available to satisfy those wants. |
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1. the study of choice in the presence of scarcity.
2. study of exchange
3. All considerations bearing on the provision and distribution of goods and services
4. "What economist do" |
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| the science of how individuals and societies make choices in the presence of scarcity. |
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| over-extending the capabilities provided |
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| Orthodox Economic Science |
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| Economic theories and practices accepted by most professional economists |
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| Heterodox Economic Science |
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| Economic theories and practices accepted by a relatively small minority of professional economist |
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| The branch of economics that deals with human behavior and choices as they relate to relatively small units of economic endeavor - those involving an individual, a firm, an industry, a single market |
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| The branch of economics that deals with human behavior and choices as they relate to highly aggregate markets (such as the goods and services market) or the entire economy). |
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| Theory > Economic Model > Testing of Theory/Model |
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| Inductive theories involve the act or process of inferring from the particular to the general. |
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| Deductive theories involve the process of deriving conclusions from logical premises. |
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Abstraction of Reality
Emphasis is on simplification and explanation rather than realism |
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| other things being equal. |
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| what is good for the individual is good or true for the group or society. |
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| Post hoc ergo propter hoc |
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Definition
Because A comes before B, A causes B
Most closely associated with deductive theories |
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| Association-Causation Fallacy |
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Definition
The erroneous view that because two events are correlated, one event causes the other. Examples:
a) sun spot activity & stock prices
b) hem lines & stock prices |
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Definition
A statement that can be validated or tested
i.e. The unemployment rate is 5%.
Positive statements concern “what is” or what can be validated with some reasonable assurance of accuracy.” |
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A statement that cannot be validated or tested.
i.e. The unemployment should be less than 4%.
Normative statements concern “what ought to be or ideas and opinions that cannot be validated” |
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| The most highly valued opportunity or alternative forfeited when a choice is made. |
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| Since production and consumption always require the use of one or more scarce resources, there is always an opportunity cost associated with producing or consuming a good. |
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| The way in which society decides what goods to produce, how to produce them, and for whom the goods will be produced. |
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All natural resources, such as minerals, forests, water and unimproved land.
Land is paid rent. |
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The physical and mental talent people contribute to the production process.
Labor is paid a wage. |
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Produced goods that can be used as inputs for further production, such as factories, machinery, tools, computers, and buildings.
Capital is paid interest. |
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The particular talent that some people have for organizing the resources of land, labor, and capital to produce goods and services, seek new business opportunities, and develop new ways of doing things.
Entrepreneurs are paid a profit. |
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| "let if fall where it may" free market system. |
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| comprised of government and private sector. |
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| economy is systematically portioned out based on favoritism. |
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| the means of production are controlled by the government. |
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| economy is completely regulated buy the government. |
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| An efficient state of affairs exists when an objective is realized using the least resources possible. |
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| An increase in the total output of an economy. |
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| Equality of income and wealth. |
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| A condition in which one or more economic inputs and/or outputs i.e. wages, unemployment, prices, investment, etc. exhibit minimal variability. |
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| The body of skills and knowledge available to produce and /or distribute a good or service. An advance in technology commonly refers to the ability to produce more output with a fixed amount of resources or the ability to produce the same output with fewer resources. |
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