Macroeconomics (Chapter 1 and 2)

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the limited nature of society’s resources
the study of how society manages its scarce resources
the property of society getting the most it can from its scarce resources
the property of distributing economic prosperity uniformly among members of society
Opportunity Cost
whatever must be given up to obtain some item
Rational People
people who systematically and purposefully do the best they can to achieve their objectives
Marginal Changes
small incremental adjustments to an existing plan of action
(marginal benefit – diamonds)(marginal cost – bag of peanuts and pop for a standby passenger)
something that induces a person to act
Market Economy
an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services
Property Rights
the ability of an individual to own and exercise control over scarce resources (a restaurant will not sell food if customers won’t pay)
Market Failure
a situation in which a market left on its own fails to allocate resources efficiently (a company cannot produce enough to get to customers)
the impact of one person’s actions on the well-being of a bystander
Market Power
the ability of a single economic actor (for small group of actors) to have a substantial influence on market prices (competition – monopolies)
the quantity of goods and services produced from each unit of labor imput
an increase in the overall level of prices in the economy
Business Cycle
fluctuations in economic activity, such as employment and production
Circular-flow Diagram
a visual model of the economy that shows how dollars flow through markets among households and firms
Production Possibilities Frontier
a graph that shows the combinations of output that 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 markets
the study of economy-wide phenomena, including inflation, unemployment, and economic growth
Positive Statements
claims that attempt to describe the world as it is
Normative Statements
claims that attempt to prescribe how the world should be
Categories: Macroeconomics