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