Economics Definitions

Economics Definitions - Economics Definitions Chapter 1...

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Economics Definitions Chapter 1 Allocative efficiency – A state of the economy in which production reflects consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it. Centrally planned economy- An economy in which the government decides how economic resources will be allocated. Economic model – simplified versions of reality used to analyze real-world economic situations Economic variable – something measurable that can have different values, such as the wages of software programmers. Economics - the study of the choices people make to attain their goals, given their scarce resources Equity – the fair distribution of economic benefits Macroeconomics – the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth Marginal analysis – analysis that involves comparing marginal benefits and marginal costs. Market – a group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade Market economy – an economy in which the decisions of households and firms interacting in markets allocate economic resources Microeconomics – the study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices Mixed economy – an economy in which most economic decisions result from the interaction of buyers and sellers in markets, but in which the government plays a significant role in the allocation of resources. Normative analysis – analysis concerned with what ought to be Positive analysis – analysis concerned with what is
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Productive efficiency – the situation in which a good or service is produced at the lowest possible cost Scarcity – the situation in which unlimited wants exceed the limited resources available to fulfill those wants Trade-off – the idea that because of scarcity, producing more of one good or service means producing less of another good or service Voluntary exchange – the situation that occurs when both the buyer and the seller of a product are made better off by the transaction Chapter 2 Absolute advantage – the ability of an individual, firm, or country to produce more of a good or service than competitors using the same amount of resources Circular-flow diagram – a model that illustrates how participants in markets are linked
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Economics Definitions - Economics Definitions Chapter 1...

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