Chapter One- Thinking Like An Economist

Economics

Study of how people make choices under conditions of scarcity and of the results of those choices for society.

Rational Person

Someone with well-defined goals who tries to fulfill those goals as best he or she can.

Economic Surplus

The economic surplus from taking any action is the benefit of taking that action minus its cost.

Opportunity Cost

The opportunity cost of an activity is the value of the next-best alternative that must be forgone in order to undertake the activity.

Sunk Cost

A cost that is beyond recovery at the moment a decision must be made.

Marginal Cost

The increase in total cost that results from carrying out one additional unit of an activity.

Marginal Benefit

The increase in total benefit that results from carrying out one additional unit of an activity.

Average Cost

The total cost of undertaking n units of an activity divided by n.

Average Benefit

The total benefit of undertaking n units of an activity divided by n.

Normative Economic Principle

One that says how people should behave.

Positive Economic Principle

One that predicts how people will behave.

Microeconomics

The study of individual choice under scarcity and its implications for the behavior of prices and quantities in individual markets.

Macroeconomics

The study of the performance of national economies and the policies that governments use to try to improve that performance.

Scarcity Principle/No-Free-Lunch Principle

having more of one good thing means less of another.

Cost-Benefit Principle

An individual (or firm or society) should take an action if, and only if, the extra benefits from taking the action are at least as great as the extra costs.

The Incentive Principle

A person (or a firm or a society) is more likely to take an action if its benefit rises, and less like likely to take it if its costs rises. In short, incentives matter.

Pitfall #1

Measure costs and benefits as proportions rather than absolute dollar amounts.

Pitfall #2

Ignoring opportunity costs. The opportunity cost of an activity is the value of the next-best alternative that must be forgone in order to engage in that activity.

Pitfall #3

Failure to ignore sunk costs. The only costs that should influence a decision about whether to take an action are those that we can avoid by not taking the action.

Pitfall #4

Failure to understand the average-marginal distinction. It is about the extent to which an activity must be pursued. Economists refer to the cost of an additional unit of activity as the marginal cost of the activity. The benefit of an additional unit of the activity is the marginal benefit of the activity.

Chapter One- Thinking Like An Economist - Subjecto.com

Chapter One- Thinking Like An Economist

Your page rank:

Total word count: 433
Pages: 2

Calculate the Price

- -
275 words
Looking for Expert Opinion?
Let us have a look at your work and suggest how to improve it!
Get a Consultant

Economics

Study of how people make choices under conditions of scarcity and of the results of those choices for society.

Rational Person

Someone with well-defined goals who tries to fulfill those goals as best he or she can.

Economic Surplus

The economic surplus from taking any action is the benefit of taking that action minus its cost.

Opportunity Cost

The opportunity cost of an activity is the value of the next-best alternative that must be forgone in order to undertake the activity.

Sunk Cost

A cost that is beyond recovery at the moment a decision must be made.

Marginal Cost

The increase in total cost that results from carrying out one additional unit of an activity.

Marginal Benefit

The increase in total benefit that results from carrying out one additional unit of an activity.

Average Cost

The total cost of undertaking n units of an activity divided by n.

Average Benefit

The total benefit of undertaking n units of an activity divided by n.

Normative Economic Principle

One that says how people should behave.

Positive Economic Principle

One that predicts how people will behave.

Microeconomics

The study of individual choice under scarcity and its implications for the behavior of prices and quantities in individual markets.

Macroeconomics

The study of the performance of national economies and the policies that governments use to try to improve that performance.

Scarcity Principle/No-Free-Lunch Principle

having more of one good thing means less of another.

Cost-Benefit Principle

An individual (or firm or society) should take an action if, and only if, the extra benefits from taking the action are at least as great as the extra costs.

The Incentive Principle

A person (or a firm or a society) is more likely to take an action if its benefit rises, and less like likely to take it if its costs rises. In short, incentives matter.

Pitfall #1

Measure costs and benefits as proportions rather than absolute dollar amounts.

Pitfall #2

Ignoring opportunity costs. The opportunity cost of an activity is the value of the next-best alternative that must be forgone in order to engage in that activity.

Pitfall #3

Failure to ignore sunk costs. The only costs that should influence a decision about whether to take an action are those that we can avoid by not taking the action.

Pitfall #4

Failure to understand the average-marginal distinction. It is about the extent to which an activity must be pursued. Economists refer to the cost of an additional unit of activity as the marginal cost of the activity. The benefit of an additional unit of the activity is the marginal benefit of the activity.

Share This
Flashcard

More flashcards like this

NCLEX 10000 Integumentary Disorders

When assessing a client with partial-thickness burns over 60% of the body, which finding should the nurse report immediately? a) ...

Read more

NCLEX 300-NEURO

A client with amyotrophic lateral sclerosis (ALS) tells the nurse, "Sometimes I feel so frustrated. I can’t do anything without ...

Read more

NASM Flashcards

Which of the following is the process of getting oxygen from the environment to the tissues of the body? Diffusion ...

Read more

Unfinished tasks keep piling up?

Let us complete them for you. Quickly and professionally.

Check Price

Successful message
sending