1. average benefit
    Total benefit of undertaking n units of an activity divided by n
  2. average cost
    Total cost of undertaking n units of an activity divided by n.
  3. economics
    The study of how people make choices under conditions of scarcity and of the results of those choices for society.
  4. economic surplus
    The benefit of taking any action minus its cost.
  5. efficiency
    Obtaining the maximum possible output from a given amount of inputs.
  6. equity
    A state of impartiality and fairness
  7. fallacy of composition
    The argument that because something is true for a part, it also is true for the whole; the mistake of falsely assuming that what is true at the level of a particular individual, household, firm, or industry is necessarily true at a higher aggregate level
  8. macroeconomics
    The study of the performance of national economies and the policies that governments use to try to improve that performance.
  9. marginal benefit
    The increase in total benefit that results from carrying out one more unit of an activity.
  10. marginal cost
    The increase in total cost that results from carrying out one additional unit of an activity.
  11. microeconomics
    • The study of individual choice under scarcity, and its implications for
    • the behaviour of prices and quantities in individual markets.
  12. normative economics
    Economic statements that reflect subjective value judgments and that are based on ethical Positions.
  13. opportunity cost
    The value of the next-best alternative that must be forgone in order to undertake the activity.
  14. positive economics
    Economic analysis that offers cause-and-effect explanations of economic relationships; the propositions, or hypotheses, that emerge from positive economics can, in principle, be confirmed or refuted by data; in principle, data can also be used to measure the magnitude of effects predicted by positive economics.
  15. post hoc fallacy
    The argument that because event A precedes event B, event A causes event B.
  16. rational person
    Someone with well-defined goals who tries to fulfill those goals as best as he or she can.
  17. sunk cost
    A cost that is beyond recovery at the moment a decision must be made.
  18. time value of money
    The fact that a given dollar amount today is equivalent to a larger dollar amount in the future, because the money can be invested in an interest-bearing account in the meantime.
Card Set
ch1 key terms econ