Economics Today (the Macro View) Chapters 1-4

Economics Today (the Macro View) Chapters 1-4 Incentives ️Rewards or penalties for engaging in a particular activity Economics ️The study of how people allocate their limited resources to satisfy their unlimited wants Resources ️Things used to produce goods and services to satisfy people's wants Wants ️What people would buy if their incomes were unlimited Microeconomics ️The study of decision making undertaken by individuals (or households) and by firms Macroeconomics ️The study of the behavior of the economy as a whole, including such economywide phenomena as change in unemployment, the general price level, and national income Aggregates ️Total amounts or quantities. ____________ demand, for example, is total planned expenditures throughout a nation Economic system ️A society's institutional mechanism for determining the way in which scarce resources are used to satisfy human desires Rationality assumption ️The assumption that people do not intentionally make decisions that would leave them worse off Models, or theories ️Simplified representations of the real world used as the basis for predictions or explanations Ceteris paribus assumption ️The assumption that nothing changes except the factor or factors being studied Empirical ️Relying on real-world data in evaluating the usefulness of a model Behavioral economics ️An approach to the study of consumer behavior that emphasizes psychological limitations and complications that potentially interfere with rational decision making Bounded rationality ️The hypothesis that people are nearly, but not fully, rational, so that they cannot examine every possible choice available to them but instead use simple rules of thumb to sort among the alternatives that happen to occur to them Positive economics ️Analysis that is strictly limited to making either purely descriptive statements or scientific predictions; for example, "If A, then B." A statement of what is. Normative economics ️Analysis involving value judgements about economics policies; relates to whether outcomes are good or bad. A statement of what ought to be. Scarcity ️A situation in which the ingredients for producing the things that people desire are insufficient to satisfy all wants at a zero price Production ️Any activity that results in the conversion of resources into products that can be used in consumption Land ️The natural resources that are available from nature. _____ as a resource includes location, original fertility and mineral deposits, topography, climate, water, and vegetation Labor ️Productive contributions of humans who work Physical capital ️All manufactured resources, including buildings, equipment, machines, and improvements to land that are used for production Human capital ️The accumulated training and eduction of workers Entrepreneurship ️The component of human resources that performs the functions of raising capital; organizing, managing, and assembling other factors of production; making basic business policy decisions; and taking risks Goods ️All things from which individuals derive satisfaction or happiness