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Cards In This Set
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Scarcity and Choice
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Resources can produce or buy only a faction of goods and services desired by people. Scarcity implies the need for choice.
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Opportunity cost
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The benefit given up by not using resources in the best alternative way.
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Maximizing Decisions
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People are maximizers, conusmbers maximize utility, producers maximize profits.
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Marginal Decisions
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All decisions are based on weighing marginal cost agains marginal benefit.
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Marginal Cost
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The increase in total cost resulting from increasing output by one unit.
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Marginal Benefit
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The extra wages and benefits that must be paid
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Tradional Economic System
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One in which behavior is based primarily on tradion, custom, and habit.
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Free- Market Economy
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And economy in which most economic decisions are made by private housholds and firms
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Command (centrally planned) Economy
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And economy in which most economic decisions are made by a central planning authority.
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Mixed Economies
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In the sense some decisions are made by firms and households and some by the gov.
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Normative Statements
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Depend on value judgments and opinions, cannot be settled by recourse to facts.
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Positive Statements
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Don not involve value judgements. they are statements about what is, was or will be.
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Endogenous variable
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One whose value is determined within the theory.
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Exogenous variable
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Influences the endogenous variables but is itself determined outside the theory.
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Motives (assumption)
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Everyone persues his or her own selfinterest when making economic decisions.
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