Microeconomics
concerned with decision-making by individual economic agents such as firms and consumers
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| Term | Definition |
|---|---|
| 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 |