Microeconomics Chapter 1

  1. Allocative efficiency
    A state of the economy in which production is in accordance with consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal befit to society equal to the marginal cost of producing it.
  2. Centrally planned economy
    An economy in which the government decides how economic resources will be allocated.
  3. Economic model
    A simplified version of reality used to analyze real-world economic situations.
  4. Economic variable
    Something measurable that can have different values, such as the incomes of doctors.
  5. Marginal analysis
    Analysis that involves comparing marginal benefits and marginal costs.
  6. Market economy
    An economy in which the decisions of households and firms interacting in markets allocate economic resources.
  7. Mixed economy
    An economy in which most economic decisions result form the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.
  8. Normative analysis
    Analysis concerned with what ought to be.
  9. Opportunity cost
    The highest-valued alternative that must be given up to engage in an activity.
  10. Positive analysis
    Analysis concerned with what is.
  11. Productive efficiency
    A situation in which a good or service is produced at the lowest possible cost.
  12. Trade-off
    The idea that, because of scarcity, producing more of one good or service means producing less of another good or service.
  13. Voluntary exchange
    A situation that occurs in markets when both the buyer and the seller of a product are made better off by the transaction.
Card Set
Microeconomics Chapter 1
Chapter 1