Macroeconomics Chapter 1,2,3,8

the study of the management and allocation of limited resources

a simplified version of reality used to analyze real-world economics situations

a situation in which unlimited wants exceed the limited resources available to fulfil those wants

the study of how households and firms make choices

group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade

1. People are rational 2. People respond to economic incentives 3. optimal decisions are made at the margin

involves comparing marginal benefit to marginal cost

concerned with what is

concerned with what ought to be

maximized utility

maximize their profit

maximize social welfare

1.What will be produced
2 How will it be produced
3.Who will receive it

the idea that because of scarcity, producing more of one g/s means producing less of another

fair distribution of economic benefits

1. decide on assumptions
2. Formulate a testable hypothesis
3. Use economic data to test the hypothesis
4. revise the model
5. retain the revised model

a situation in which a good/service is produced at the lowest possible cost

a state of the economy in which production is accordance with consumer preferences

a situation that occurs in markets when both parties are benefited by the transaction

The process a firm uses to turn inputs into outputs.

practical application of an invention

machines used to produce good or services

demand increases as income rises

demand increases as income falls

the amount of a good and service a firm is willing to sell

the amount of a good and service people are willing to buy

increase in price causes increase in quantity supplied

as price falls demand increases