Term
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Definition
| Although we have boundless needs and wants, the resources available to us are limited. So having more of one good thing usually means having less of another. |
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Term
| The Cost-Benefit Principle |
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Definition
| An individual (or a firm or a society) should take an action if, and only if, the extra benefits from taking the action are at least as great as the extra costs. |
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Term
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Definition
| A person (or a firm or a society) is more likely to take an action if its benefit rises, and less likely to take it if its cost rises. INCENTIVES MATTER! |
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Term
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Definition
| The economic surplus from taking any action is the benefit of taking the action minus its cost. |
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Term
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Definition
| The opportunity cost of an activity is the value of what must be forgone to undertake the activity. |
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Term
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Definition
| A cost that is beyond recovery at the moment a decision must be made. |
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Term
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Definition
| the increase in total cost that results from carrying out one additional unit of an activity. |
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Term
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Definition
| The increase in total benefit that results from carrying out one additional unit of an activity. |
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Term
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Definition
The total cost of undertaking units of an activity divided by n.
total cost/n |
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Term
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Definition
The total benefit of undertaking n units of an activity divided by n.
total benefit/n |
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Term
| Normative Economic Principle |
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Definition
| One that says how people SHOULD behave. |
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Term
| Positive Economic Principle |
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Definition
| One that predicts how people WILL behave. |
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Term
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Definition
| The study of individual choice under scarcity and its implications for behavior of prices and quantities in individual markets. |
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Term
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Definition
| The study of the performance of national economies and the policies that governments use to try to improve that performance. |
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Term
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Definition
someone with well-defined goals who tries to fulfill those goals as best he or she can.
The Cost-Benefit Principle is a fundamental tool for the study of how rational people make choices. |
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Term
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Definition
| The study of how people make choices under conditions of scarcity and of the results of those choices for society |
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