ECONOMICS

The study of how people choose to use their limited resources to satisfy their unlimited wants

ECONOMY

A system used to manage limited resourses for the production, distribution, and consumption of goods and services

Positive Economics

The branch of economics that uses objective analysis to find out how the world works.  The goal is to describe how thinks are.

Normative Economics

The branch of economics that applies value judgements to data in order to recommend actions or policies.  The goal is to advise how things ought to be done.

Scarcity

The condition that results because people have limited resources but unlimited wants.

Tradeoff

The exchange of one benefit or advantage for another that is thought to be better.

Cost Benefit Analysis

A way to compare the costs of an action with the benefits of that action.  If benefits exceed costs, then the action is worth taking.

Incentive

Any factor that encourages or motivates a person to do something.  Prices, taxes, and laws create incentives that influence how people behave.

Economic Enigmas

Puzzles or riddles that might be explained through an economic analysis.

Enigma

Obscure or hard to understand

Resource

Anything used to produce an economic good or service.

Microeconomics

Economic decisions made by individuals, households, and businesses.

Macroeconomics

Economics focusing on the working of the economy as a whole.

Scarcity-Forces Tradeoffs Principle

Limited resrouces force people to make choices and face tradeoffs- also known as the "no free lunch principle"- every choice, even a free lunch, involves tradeoffs.

Costs

What you spend in money, time, and effort or other sacrifices

Benefits

What you gain from something in terms of money, experience, or other improvements in your situation. 

Costs Versus Benefits Principle

People choose something when the benefits of doing so are greter than the cost.

Market

Any arrangement that brings buyers and seller together to do business with each other.

Market Coordinate Trade Principle

Markets usually do better than anyone or anything else at coordinating exchanges between buyers and sellers.

Future Consequences Count Principle

Decisions made today have consequences not only for tody but in the future.

Scientific Method

Posing a question, developing a hypothesis, conducting studies, gathering information, analyzing information, and evaluating the hypothesis

Data

Factual information

Graph

Visual representation between 2 given sets of data

Variable

Quantity or data can vary or change

Axis

Each of the 2 perpendicular lines of a co-ordinate system- X axis is the horizontal line- Y axis is the vertical line.

Curve

Any line representing data points plotted on a graph- it doesn't have to be curved.

Rational Behavior Model

A tool for understading human behavior- people make decisions in ways that serve their own interests without taking into account the well being of others.

Economic Model

A simplified representation of reality that allows economists to focus on the efforts on one change at a time.  It can be an equation, computer program, diagram, or witten description.