Macro Definitions 1

Macro Definitions 1 - DEFINITIONS Economics The study of how society manages its scarce resources Scarcity The limited nature of societys resources

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DEFINITIONS: Economics: The study of how society manages its scarce resources. Scarcity: The limited nature of society’s resources. Opportunity cost: Whatever must be given up to obtain some item. Incentive: Something that induces a person to act. Market Economy: An economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services. Micro: The study of how households and firms make decisions and how they interact in markets. Macro: The study of economy wide phenomena, including inflation, unemployment, and economic growth. Normative Statements: Claims that attempt to prescribe how the world should be. Positive Statements: Claims that attempt to describe the world as it is. Absolute advantage: The ability to produce a good using fewer inputs than another producer. Comparative advantage: The ability to produce a good at a lower opportunity cost than another producer. Competitive market:
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This note was uploaded on 10/12/2008 for the course ECON 191 taught by Professor Rolfe during the Spring '08 term at Kansas.

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Macro Definitions 1 - DEFINITIONS Economics The study of how society manages its scarce resources Scarcity The limited nature of societys resources

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