Microeconomics

concerned with decision-making by individual economic agents such as firms and consumers

Macroeconomics

concerned with the aggregate performance of the entire economic system

Empirical Economics

relies upon facts to present a description of economic activity

Economic Theory

relies upon principles to analyze behavior of economic agents

Inductive Logic

creates principles for observation

Deductive Logic

hypothesis is formulated and tested

Positive Economics

is concerned with what is

Normative Economics

is concerned with what should be

Rivalry

if one agent consuming the good/resource limits another agent's ability to use that good/resource

Capital

the physical assets used in production (ex. plant and equipment)

Cost-Benefit Principle

costs and benefits that incentives and shape decisions

Willingness to Pay

the idea of converting nonfinancial costs or benefits into their monetary equivalent

Economic Surplus

the total benefits minus the total cost flowing from a decision

Framing Effect

when a decision is affected by how a choice is described or framed

Opportunity Cost Principle

the next best alternative that must be forgone as a result of a particular decision

Sunk Costs

a cost that has been incurred and can't be reversed

Marginal Principle

decisions about quantities are best made incrementally

Marginal Benefit

the extra benefit from one extra unit (of goods purchased, hours studied, etc.)

Marginal Cost

the extra cost from one extra unit

Rational Rule

if something is worth doing, keep doing it until your marginal benefits equal your marginal costs

Interdependence Principle

Your best choice depends on the following factors: - your other choices - the choices others make - developments in other markets and expectations about the future