Exam 1 study guide.docx - Scarcity the limited nature of society's resources given society's unlimited wants and needs(page 6 Economics the study of how

Exam 1 study guide.docx - Scarcity the limited nature of...

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Scarcity - the limited nature of society's resources, given society's unlimited wants and needs (page 6) Economics - the study of how individuals and society allocate their limited resources to satisfy their unlimited wants (page 6) Microeconomics - the study of the individual units that make up the economy (page 7) Macroeconomics - the study of the overall aspects and workings of an economy (page 7) Incentives - factors that motivate a person to exert effort (page 8) opportunity cost - the highest-valued alternative that must be sacrificed to get something else (page 13) economic thinking - a purposeful evaluation of the available opportunities to make the best decision possible (page 15) marginal thinking - the evaluation of whether the benefit of one more unit of something is greater than its cost (page 15) markets - systems that bring buyers and sellers together to exchange goods and services (page 17) Barter - involves individuals trading a good they already have or providing a service in exchange for something they want. (page 17) Trade - the voluntary exchange of goods and services between two or more parties (page 19) comparative advantage - the situation where an individual, business, or country can produce at a lower opportunity cost than a competitor can (page 19) positive statement - an assertion that can be tested and validated; it describes "what is" (page 29) normative statement - an opinion that cannot be tested or validated; it describes "what ought to be" (page 29) ceteris paribus - meaning "other things being equal," the concept under which economists examine a change in one variable while holding everything else constant (page 30) endogenous factors - the variables that can be controlled for in a model (page 31) exogenous factors - the variables that cannot be controlled for in a model (page 31) production possibilities frontier - a model that illustrates the combinations of outputs that a society can produce if all of its resources are being used efficiently (page 33) law of increasing opportunity cost - law stating that the opportunity cost of producing a - good rises as a society produces more of it (page 36)
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specialization - limiting one's work to a particular area (page 39) absolute advantage - the ability of one producer to make more than another producer with the same quantity of resources (page 41) consumer goods - goods produced for present consumption (page 47) capital goods - goods that help produce other valuable goods and services in the future (page 47) investment - the process of using resources to create or buy new capital (page 47) variable - a quantity that can take on more than one value (page 57) scatterplot - a graph that shows individual (x,y) points (page 60) negative correlation - condition occurring when two variables move in opposite directions (page 60) positive correlation - condition occurring when two variables move in the same direction (page 60) slope - the change in the rise along the y axis (vertical) divided by the change in the run along the x axis (horizontal) (page 61) causality - condition existing when one variable influences another (page 65)
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