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Scarcity
the goods available are too few to satisfy individuals desires
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induction
a method of reasonging in which one develops general principles by looking for patterns in the data
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marginal cost
the additional cost to you over and above the cost you have already incurred
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sunk costs
costs that have already been incurred and cannot be recovered
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marginal benefit
the additional benefit above what you've already derived
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economic decision rule
- if the marginal benefits of doing something exceeds the marginal cost do it
- if the marginal cost of doing something exceed the marginal benefits dont do it
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opportunity cost
the benefit that you might have gained from choosing the next-best alternative
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economic forces
the necessary reactions to scarcity
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market force
an economic force that is given relatively free rein by society to work through the market
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invisible hand
the price mechanism, the rise and fall of prices that guide our actions in a market
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abduction
a method of analysis that uses a combination of inductive methods and deductive methods
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economic model
a framework that places the generalized insights of the theory in a more specific contextual setting
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economic principle
a commonly held economic insight stated as a law or general assumption
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experimental economics
a branch of economics that studies the economy through controlled laboratory experiments
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natural experiments
naturally occuring events that approximate a controlled experiment where something has changed in one place but has not changed somewhere else
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efficiency
achieving a goal as cheaply as possible
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invisible hand theorem
a market economy through the price mechanism, will tend to allocate resources efficiently
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microeconomics
the study of individual choice, and how that choice is influenced by economic forces
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macroeconomics
the study of the economy as a whole
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economic policies
actions or inactions taken by government to influence economic actions
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positive economics
the study of what is, and how the economy works
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nomative economics
the study of what the goals of the economy should be
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art of economics
also called political economy the application of the knowleadge learned in positive economics to the achievement of the goals one has determiend in normative economics
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