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27 Cards in this Set

  • Front
  • Back

Scarcity

Our inability to satisfy all our wants.

Incentive

A reward that encourages an action or a penalty that discourages one.

Economics

The social science that studies the choices that individuals, businesses, governments and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices.

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.

Goods and services

The objects that people value and produce to satisfy human wants.

Factors of production

Land, labour, capital, entrepreneurship

What each factor of production earns

Land - rent


Labour - wages


Capital - interest


Entrepreneurship - profit

Self-interest

A choice made where you think that choice is the best one available for you

Social interest

A choice leading to an outcome that is the best for society as a whole (focuses on effeciency and fairness)

Globalisation

The expansion of international trade, borrowing and lending, and investment

Rational choice

Compares costs and benefits and achieves the greatest benefit over cost for the person making the choice

What is benefit determined by?

Personal preferences

What is benefit measured by?

The most a person would be willing to give up to get something

Opportunity cost

The highest-valued alternative that must be given up to get something. (involves time and money)

Marginal benefit

The benefit that arises from an increase in an activity

Central idea of economics

We can predict the self-interested choices that people make by looking at the incentives they face.

Positive statement

A statement about what is

Normative statement

A statement about what ought to be

Economic models

A description of some aspect of the economic world that includes only those features that are needed for the purpose at hand

How is an economic model tested?

By comparing its predictions with the facts

How do economists cope with the problems involving the testing of economic models?

- looking for natural experiments


-conducting statistical investigations to find correlations


-performing economic experiments to see how various factors influence decision-making

Ceteris paribus

"other things being equal"


The logical device used to isolate the factor of interest and investigate its effects in the clearest possible way, by changing one factor at a time and holding other relevant factors constant.

Fallacies

Errors of reasoning that lead to a wrong conclusion

Fallacy of Composition

What is true of the parts is true of the whole or that what is true of the whole is true of the parts.

Post Hoc Fallacy

"after this, therefore because of this"


A first event causes a second event, because the first event occurred before the second.

What can cause a graph to be misleading?

-breaks in axes


-stretched or compressed scales