Econ 101 Terms-exam 1

Econ 101 Terms-exam 1 - Econ 101 Terms to Know: Exam 1...

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Econ 101 Terms to Know: Exam 1 Scarcity – the situation in which unlimited wants exceed the limited resources available to fulfill those wants Economics – the study of the choices people make to attain their goals given their scarce resources Economic model – a simplified version of reality used to analyze real-world economic situations Market – a group of buyers and sellers of a good or service and the institution or arrangement by which they come together Marginal analysis – analysis that involves comparing marginal benefits and marginal costs Trade-off – the idea that because of scarcity, producing more of one good or service means producing less of another good or service Opportunity cost – the highest-valued alternative that must be given up to engage in an activity Centrally planned economy – an economy in which the government decides how economic resources will be allocated Market economy – an economy in which the decisions of households and firms interacting in markets allocate economic resources Mixed economy – an economy in which most economic decisions result from the interactin of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources Productive efficiency – the situation in which a good or service is produced at the lowest possible cost Allocative efficiency – a state of the economy in which production is in accordance with consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it Voluntary exchange – the situation that occurs in markets when both the buyer and seller of a product are made better off by the transaction Equity – the fair distribution of economic benefits
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Economic variable – something measureable that can have different values, such as the wages of software programmers Positive analysis – analysis concerned with what is Normative analysis – analysis concerned with what ought to be Microeconomics – the study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices Macroeconomics – the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth
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Econ 101 Terms-exam 1 - Econ 101 Terms to Know: Exam 1...

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