economics
the study of scarcity and choice
individual choice
decisions by individuals about what to do, which necessarily involve decisions about what not to do
incentatives
rewards or punishments that motivate particular activities
economy
a system that coordinates choices about production with choices about consumption, and distributes goods and services to the people who want them
market economy
the decisions of individual producers and consumers largely determine what, how, and for whom to produce, with little government involvement in the decisions
command economy
industry is publicly owned and a central authority makes production and consumption decisions
property rights
establish ownership and grant individuals the right to trade goods and services with each other
marginal analysis
study of the costs and benefits of doing a little bit more of an activity vs. a little bit less
marginal benefit
gain from doing something one more time
marginal cost
cost of doing something one more time
resource
anything that can be used to produce something else
factors of production
land, labor, capital, entrepreneurship
land
resources from nature
labor
effort of workers
capital
manufactured goods used to make other goods and services
Entrepreneurship
the efforts of entrepreneurs in organizing resources for production, taking risks to create new enterprises, and innovating to develop new products and production processes
opportunity cost
value of the next best alternative that you must give up in order to get the item
Microeconomics
the study of how individuals, households, and firms make decisions and how those decisions interact
macroeconomics
concerned with the overall ups and downs in the economy
economic aggregates
economic measures that summarize data across many different markets
positive economics
the branch of economic analysis that describes the way the economy actually works
normative economics
prescriptions about the way the economy should work
economic models
simplified representations of reality using graphs or equations
value-added tax
national sales tax