Limited resources and unlimited wants
study of how society manages its scarce resources
The property of society getting the most from its scarce resources
The property of distributing economic prosperity fairly among society's members
Systematically and purposefully doing the best you can to achieve your objectives
Whatever is given up to get something
Incremental adjustments to an existing plan
The ability of an individual to own and exercise control over scarce resources
The principle that self interested market participants may unknowingly maximize the welfare of society as a whole
A situation in which the market fails to allocate resources efficiently
When one person's actions have an impact on a bystander
The ability of an individual or group to substantially influence market prices
An economic system where interaction of households and forms in market determines the allocation of resources
The case in which there is only one seller in the market
The amount of goods and services produced per hour by worker
An increase in the overall level of prices
Fluctuation in economic activity
Determine Intended and Unintended Results (DI and UR)
Government raise minimum wage to $10 per hour. 1.Workers find jobs with higher wage and are better off. 2. Workers find no job at all because fewer firms want to higher them and pay for the higher wage
Susan gives up income from work and money from tuition
Determine Opportunity Cost.
Susan can work full time or go to college. She chooses college.
Susan gives up college degree and higher pay in the future
Determine Opportunity Cost.
Susan can work full time or go to college. She chooses work.
No. Yes because you can't have clean air without giving something up.
Is air scarce? is clean air scarce?
Objective development and testing of theories
Simplifications of reality based on assumptions
Circular Flow Diagram
A diagram of the economy that shows the flow of goods and services , factors of production and the monetary payments between household and firms
Factors of Production
Inputs such as land, labor, and capital
Production Possibilities Frontier
A graph that shows the combination of output the economy can possibly produce given the available factors of production and the available production technology
The study of how households and firms make decisions and how they interact in the markets
The study of the economy wide phenomena
Descriptions of the world as it is
Prescription of how the world ought to be
Something that induces a person to act
The ability to produce a good with lower inputs
The ability to produce a good at a lower opportunity cost than another producer
Gains from Trade
The increase in total production due to specialization by trade
Goods produced abroad and sold domestically
Goods produced domestically and sold abroad