Economics 1021A MidtermKeyterms

Economics 1021A MidtermKeyterms - Economics 1021A...

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Economics 1021A Nov.Midterm Keyterms Scarcity- our inability to satisfy all our want Incentive- a reward that encourages an action or a penalty that discourages one 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 Good and service- the objects that people value and produce to satisfy human wants Self-interest- a choice is in your self-interest if it is the best one available for you Social-interest- self-interested choices promote the social interest if they lead to an outcome that is the best for society as a whole Tradeoff- an exchange-giving up one thing to get something else Big tradeoff- the tradeoff between equality and efficiency Opportunity cost-highest valued alternative that we must give up to get it Margin- when a choice is changed by a small amount or by little at a time, the choice is made at the margin Marginal cost- the opportunity cost of producing one more unit of a good or service. It is the best alternative forgone. It is calculated as the increase in total cost divided by the increase in output Production possibility frontier- the boundary between the combinations of goods and services that can be produced and the combinations that cannot Production efficiency- a situation in which goods and services are produced at the lowest possible cost Allocative efficiency- a situation in which goods and services are produced at the lowest possible cost and the quantities that provide the greatest possible benefit. We cannot produce more of any good without giving up some of another good that we value more highly Preferences- a description of a person’s likes and dislikes Marginal benefit-the benefit that a person receives from consuming one more unit of a good or service. It is measured as the maximum amount that a person is willing to pay for one more unit of the good or service Marginal benefit curve-
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