Macroeconomics Chapter 1
Macroeconomics Chapter 1 ECON 2010
University of Memphis
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This 2 page Class Notes was uploaded by Alexandra Russell on Tuesday February 9, 2016. The Class Notes belongs to ECON 2010 at University of Memphis taught by Ayangbayi in Winter 2016. Since its upload, it has received 40 views. For similar materials see Principles of Economics: Macroeconomics in Economcs at University of Memphis.
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Date Created: 02/09/16
Chapter 1 Vocabulary Scarcity- when we have unlimited wants but the resources available to fulfill those wants are limited. Economics- study of the choices everyone makes to attain their goals given their scarce resources. Economic Models- simplified versions of reality used to analyze real-world economic situations. Market- a group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade. Economic Incentive- something, often money or a prize, offered to make someone behave in a particular way. Marginal- extra or additional. Marginal Benefit- the additional satisfaction or utility that a person receives from consuming an additional unit of a good or service. Marginal Cost- the change in total cost that comes from making or producing one additional item. Marginal Analysis- analysis that involves comparing marginal benefits and marginal costs. Trade-Offs- producing more of one good/service means producing less of another good/service. Opportunity Cost- the highest-valued alternative that must be given up to engage in that activity. Centrally Planned Economy- government decides how economic resources will be allocated. Market Economy- the decisions of households and firms interacting in markets allocate economic resources. Mixed Economy- an economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources. Productive Economy- occurs when a good/service is produced at the lowest possible cost. Allocative Efficiency- occurs when production is in accordance with consumer preference; in particular, every good/service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it. Voluntary Exchange- a situation that occurs in markets when both the buyer and the seller of a product are made better off by the transition. Equity- the fair distribution of economic benefits. Positive Analysis- analysis concerned with what is. Normative Analysis- analysis concerned with what ought to be. Microeconomics- the study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices. Macroeconomics- the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth.