1. Economics
    The study of how people use their scarce resources to satisfy their unlimited wants
  2. Resources
    The inputs used to produce the goods and services that people want
  3. Four Catagories of Resources
    • -Labor
    • -Capital
    • -Natural Resources
    • -Entrepreneurial Ability
  4. Labor
    The physical & mental effort used to produce goods & services. (Time)
  5. Capital
    The buildings, equipment, & human skills used to produce goods & services. (Physical vs. Human)
  6. Natural Resources
    All "gifts of nature" used to produce goods & service. (Renewable vs. Exhaustible)
  7. Entrepreneurial Ability
    Managerial & organizational skills needed to start a firm, combined with the willingness to take the risk of loss or profit.
  8. Markets
    the means by which buyers and sellers carry out exchange
  9. Product Market
    Where goods and services are bought and sold
  10. Resource Market
    where resources are bought and sold
  11. Rational Self-Interest
    • -Maximize benefit
    • -Minimize cost
  12. Marginal Analysis
    Economists analyze marginal choices, those that are incremental, additional, or extra.
  13. Microeconomics
    Studies behavior in particular markets
  14. Macroeconomics
    Studies behavior of entire economies
  15. Economic Theory/Model
    Simplification of reality used to predict real world cause/effect
  16. Ceteris Paribus
    Assumption that other variables remain unchanged
  17. Positive Economics
    What is
  18. Normative
    What should be
  19. Fallacy of Association
    The incorrect belieft that correlations equals causation
  20. Fallacy of Composition
    The incorrect belieft that what is true for the individual is true for the group
  21. Secondary Effects
    Not taking into account the unintended consequences of economic actions/policy
Card Set
Test 1