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| The study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided. |
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| What are the four main reasons to study economics? |
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| To learn a way of thinking, to understand society, to understand global affairs, and to be an informed citizen. |
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| The best alternative that we forgo, or give up, when we make a choice or decision. |
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| The process of analyzing the additional or incremental costs or benefits arising from a choice or decision. |
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| Costs that cannot be avoided because they have already incurred. |
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| "Good deals" or risk-free ventures. |
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| Where any profit opportunities are eliminated almost instantaneously. |
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| The period in England during the late eighteenth and early nineteenth centuries in which new manufacturing technologies and imporved transportation gave rise to the modern factor system and a massive movement of the population from the countryside to the cities. |
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| What are the two major divisions of economics? |
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| Microeconomics and Macroeconomics |
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| Deals with the functioning of individual industries and the behavior of individual economic decision-making units:firms and households |
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| looks at the economy as a whole |
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| Microeconomics is concerned with |
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| Macroeconomics is concerned with |
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| Attempts to understand behavior and the operation of economic systems without making judgements about whether the outcomes are good or bad. |
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| looks at the outcomes of economic behavior and asks whether they are good or bad and whether they can be made better. |
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| Normative economics can also be called |
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| the compilation of data that describe phenomena and facts. |
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| statement or set of statements about cause and effect, action and reaction. |
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| When the price of a product rises, people tend to buy less of it, when the price of a product falls, people tend to buy more. |
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| A formal statement of a theory, usually a mathematical statement of a presumed relationship between two or more variables. |
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| a measure that can change from time to time or from observation to observation. |
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| the principle that irrelevant detail should be cut away. |
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| Ceteris Paribus, All else equal |
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| A device used to analyze the relationship between two variables while the values of other variables are held unchanged. |
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| Post hoc, ergo propter hoc |
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Definition
| Literally, "after this (in time) therefore because of this" A common error made in thinking about causation: If Event A happens before Event B, it is not necessarily true that A caused B. |
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| The erroneous belief that what is true for a part is necessarily true for a whole. |
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| The collection and use of data to test economic theories |
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| What are the four criteria applied in judging economic outcomes? |
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Definition
| Efficiency, Equity, Growth, Stability |
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| Efficiency (allocative efficiency) |
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Definition
| An efficient economy is one that produces what people want at the least possible cost. |
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Fairness.
Lies in the eyes of the beholder. |
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| Increase in the total output of an economy. |
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| The condition in which national output is growing steadily, with low inflation and full employment of resources. |
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