Economics – The study of how people choose to
use their limited resources to satisfy their unlimited
wants
Economy – A system used to manage limited
resources for their production, distribution, and
consumption of goods and services.
Positive Economics – The branch of economics
that uses objective analysis to find out how the
world works. The goal is to describe how things are.
Normative Economics – That branch of economics
that applies value judgements to data in order to
recommend actions or policies. The goal is to
advise how things OUGHT to be done.
Resource – Anything that can be used to produce
an economic good or a Resources are limited and
scarce, because they come in limited amounts and
may have alternate uses.
Scarcity – That condition that results because have
limited resources to meet unlimited wants.
Tradeoff – The exchange of one benefit or
advantage for another that is thought to be better.
Cost-Benefit Analysis – Away to compare the
costs of an action with the benefits of that action. If
benefits exceed costs, then the action is worth
taking.
Incentive – Any factor that encourages or motivates
a person to do something. Prices, taxes, and laws
create incentives that influence how people behave.
Microeconomics – That branch of economics tjhat
looks at the choices of individuals, households, and
businesses.
Macroeconomics – That branch of economics that
focuses on the workings of an economy as a whole.
Market – Any arrangement that brings buyers and
sellers together to do business with each other.
The Seven Principles of Economics:
Principle 1: Scarcity Forces Tradeoffs (the no free lunch principle)
Principle 2: Costs versus Benefits
Principle 3: Thinking at the Margin
Principle 4: Incentives Matter
Principle 5: Trade makes People Better Off
Principle 6: Markets Coordinate Trade
Principle 7: Future Consequences Count
The Law of Unintended Consequences – actions of people or governments always have effects
that are not expected, or that are unintended.