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Unformatted text preview: Chapter 1 Vocabulary Economics the study of how human beings coordinate their wants a desires, given the decision making mechanisms, social customs, and the political realities of the society. Scarcity the goods available are too few to satisfy individuals desires. Marginal costs additional cost to you over and beyond the costs you have already incurred. Sunk costs costs that have already been incurred and cannot be recovered. Marginal benefit the additional benefit above what youve already derived. Economic Decision Rule: if the marginal benefits of doing something exceed the marginal cost, do it. If the marginal costs of doing something exceed the marginal benefit, dont do it. Opportunity cost the benefit that you might have gained from choosing the next best option. Economic forces the necessary reactions to scarcity. Market force economic force that is given relatively free rein by society to work thru the market. Invisible hand the price mechanism, the rise and fall of prices that guides our actions in a market. Economic model a framework that places the generalized insights of the theory in a more specific contextual setting. Economic principle a commonly held economic insight stated as a law or general assumption. Efficiency achieving a goal as cheaply as possible. Invisible hand theory a market economy, thru the price mechanism, will tend to allocate resources efficiently. Microeconomics the study of individual choice, and how that choice is influenced by economic forces. Macroeconomics the study of the economy as a whole. Economic policies or (or inaction) taken by the government to influence economic actions. Positive economics the study of what is, and how the economy works. Normative economics the study of what the goals of the economy should be. The Art of Economics the application of the knowledge learned in positive economics to the achievement of the goals one has determined in normative economics. Chapter 2 Vocabulary Production Possibility Curve a curve measuring the maximum combination of outputs that can be obtained from a given number of inputs. Input what you put into a production process to achieve an output. Output the result of an activity Comparative advantage the ability to be better suited to the production of one good than to the production of another good. Productive efficiency achieving as much output as possible from a given amount of inputs and resources. Inefficiency getting less output from inputs that, if devoted to some other activity, would produce more output. Efficiency achieving a goal using as few inputs as possible....
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This note was uploaded on 10/25/2011 for the course ECON 2030 taught by Professor Russel during the Spring '11 term at LSU Health Sciences Center.
- Spring '11