Economics Ch. 1 Vocabulary By: Nathan Spell economics the social science concerned with the efficient use of scarce resources to achieve the maximum satisfaction of economic wants economic perspective economic way of thinking marginal analysis comparisons of marginal benefits and marginal costs (“marginal” means “extra,” “additional,” or “a change in.”) scientific method the procedure for the systematic pursuit of knowledge involving the observation of facts and the formulation and testing of hypotheses to obtain theories, principles, and laws. theoretical economics the process of deriving and applying economic theories and principles principles economic principles are statements about economic behavior of the economy that enable prediction of the probable effects of certain actions generalizations statement of the nature of the relationship between two or more sets of facts other-things-equal assumption the assumption that factors other than those being considered are held constant policy economics the formulation of courses of action to bring about desired economic outcomes or to prevent undesired occurrences economic growth the production of more and better goods and services the development of a higher standard of living full employment the provision of suitable jobs for all citizens who are willing and able to work economic efficiency the achievement of the maximum fulfillment of wants using the available productive resources. price-level stability avoid large upswings and downswings in the general price level; that is, avoid inflation and deflation economic freedom guarantee that businesses, workers, and consumers have a high degree of freedom in their economic activities. equitable distribution of income ensure that no group of citizens faces poverty while most others enjoy abundance economic security provide for those who are chronically ill, disabled, laid off, aged, or otherwise unable to earn minimal levels of income balance of trade seek a reasonable overall balance with the rest of the world in international trade and financial transactions tradeoffs the achievement of a goal at the sacrifice of another macroeconomics examines either the economy as a whole or its basic subdivisions or aggregates, such as the government, household, and business sectors aggregate a collection of specific economic units treated as if they were one unit microeconomics looks at specific economic units positive economics the analysis of facts or data to establish scientific generalizations about economic behavior normative economics the part of economics involving value judgments about what the economy should be like; focused on which economic goals and policies should be implemented; policy economics fallacy of composition the false notion that what is true for the individual (or part) is necessarily true for the group (or whole) “after this, therefore because of this,” fallacy example: rooster crows before the sun rises, but the crow of the rooster doesn’t cause the sun to rise. In other words, an event isn’t necessarily caused by an event that occurs prior Works Cited -Campbell, Stanley. Economics, 15th ed. -http://www.daff.gov.au/__data/assets/image/0011/1398017/Fig-23marginal-analysis.gif -http://www.marketoracle.co.uk/images/economic-stimulus.jpg -http://www.gelman.gwu.edu/eckles-library/news/free-economics-tutoringnow-available/image -http://web2.newtownh.schools.nsw.edu.au/Science/CommonFolder/index_files/E1_Scientifi cMethod.gif -http://omniideas.com/blog/wpcontent/uploads/2009/04/positive_economic_growth.jpg -http://sorrel.humboldt.edu/~economic/econ104/marginal/margeff1.gif -http://s.wsj.net/public/resources/images/EDAG297_angell_20070822173145.gif -http://www.china-profile.com/data/figures/fig_economic-freedomindex_2008.gif -http://www.arisgeorgiades.com/slides/tradeoff.jpg