Term
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Definition
| level of satisfaction or pleasure that people recieve from their choices |
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Term
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Definition
| a diagram which shows what choices are possible, given the prices |
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Term
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Definition
| another name for the budget constraint (range of available choices) |
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Term
| diminishing marginal utility |
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Definition
| more of something leads to less utility |
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Term
| law of diminishing return |
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Definition
| as incriments of additional resources are devoted to producing something, the marginal increase in output will vecome smaller |
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Term
| answer to the escalator puzzle |
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Definition
| a step on the stairs saves you more time than a step on an elevator |
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Term
| producationg possibility frontier (PPF) |
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Definition
| a set of choices made by society as a whole (shows the maximum amount of one good that can bbe produced for any amount of the other good) |
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Term
| shape of a production possibility fronter |
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Definition
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Term
| change in PPF as the economy grows? economy falls? |
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Definition
| a growing economy pushes the PPF out and a falling economy bring the PPF in |
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Term
| Three main catagories of tradeoff |
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Definition
a)consumption choice=of quantities of good to consume
b)labor-leisure=choice what quantitiy of hours to work
c)intertemporal choice=consumption vs savings |
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Term
| three components of interest rate: |
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Definition
1)risk premium (covers the risk of not being repaid)
2)inflation
3)time value of money |
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Term
| compound interest formula |
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Definition
| (amount @ present)*(1+interst rate)^number of years=amount at future time |
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Term
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Definition
| measure cost by what is given up in exchange |
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Term
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Definition
| economic decisions and trade-off that involve a little more or a little less of something |
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Term
| law of diminishing marginal utility |
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Definition
| as a person receives more of something, the additional marginal gains tend to become smaller |
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Term
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Definition
| costs that occured in the past and cannot be recovered, these costs should be disregarded in making current decisions |
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Term
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Definition
| total revenues minus total costs |
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Term
| law of diminishing retunrs |
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Definition
| holds that as increments of additional resources are devoted to producing something, the marginal increase in output will become smaller and smaller |
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Term
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Definition
| it is impossible to use society's resources to produce more of one good without decreasing production of the other good |
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Term
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Definition
| the specific choice along a productiong possibilites frontier that reflects the mix of goods that society prefers is the choice with allocative efficiency |
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Term
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Definition
| describes the world as it is |
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Term
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Definition
| descrives how the world should be |
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