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Chapter 1 Definitions

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Terms in this set (22)

  • Scarcity

    Our inability to satisfy our wants. We want more than we can get and our inability to get everything that we want is called scarcity.  LIMITED resources

  • Incentive

    A reward that encourages an action or a penalty that discourages one

  • Economics ( 2 types)

    The social science that studies the choices that individuals, businesses, governments and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices

  • Microeconomics

    The study of the choices that individuals and businesses make, the way these choices interact in markets and the influence of governments

  • Macroeconomics

    The study of the performance of the national economy and the global economy

  • Factors of Production

    The resources used to produce goods and services:

    • Land

    • Labour

    • Capital

    • Entrepreneurship

  • Self interest

    The choices that you think are the best ones available to you are choices made in your self-interest

  • Social interest

    Choices that are the best ones for society as a whole

  • Efficient

    Not possible to make someone better off without making someone else worse off

  • Human Capital

    The knowledge and skill that people obtain from education, on the job training and work experience

  • The Gender Pay Gap

    The gap between the average hourly earnings of women and men

  • Market Capitalism

    An economic system in which individuals own land and capital and are free to buy and sell land, capital, and goods and services in markets

  • Centrally Planned Socialism

    An economic system in which the government owns all the land and capital, directs workers to jobs and decides what, how, and for whom to produce

  • Tradeoff

    An exchange; giving up one thing to get something else

  • Rational Choice

    Is one that compares costs and benefits and achieves the greatest benefit over cost for the person making the choice

  • The Opportunity Cost

    The highest-valued alternative that must be given up to get something 

  • Marginal benefit

    The benefit you receive when you increase an activity

  • Marginal Cost

    The opportunity cost you incur when you increase an activity

  • Economic Model

    a description of some aspect of the economic world that includes only those features that are needed for the purpose at hand

  • Positive statements

    a statement about what is. It says what is currently believed about the way the world operates 

    • May be right or wrong but can be checked by testing against the facts 

  • Normative statements

     a statement about what should be. It depends on values and cannot be tested. 

  • Goods and Services

    The objects that people value and produce to satisfy wants

    •  Goods are physical objects such as smartphones and automobiles

    • Services are tasks performed for people such as smartphone service and auto-repair service