| A | B |
|---|
| Economics | study of how people choose to use their limited resources to satisfy their unlimited wants |
| Economy | a system used to manage limited resources for the production, distribution, and consumption of goods and services |
| Adam Smith | considered the father of modern economics; developed a new way of thinking about everyday economic events |
| The Wealth of Nations | 18tth century text that outlined the fundamental economic principles of the industrial revolution |
| Economic enigmas | puzzles or riddles that might be explained through an economic analysis |
| Resource | anything used to produce an economic good or service |
| Microeconomics | the study of the economy at the level of individuals, households, and businesses |
| Macroeconomics | the study of the workings of the economy as a whole |
| Positive Economics | The branch of economics that uses objective analysis to find out how the world works. The goal is to describe how things are. |
| Normative Economics | The branch of economics that applies value judgments to data in order to recommend action or policies. The goal is to advise how things ought to be done. |
| Scarcity | condition that results because people have limited resources but unlimited wants. |
| Trade-off | exchange of one benefit or advantage for another that is thought to be better |
| Costs | what you spend in money, time, effort, or other sacrifice |
| Benefits | what you gain from something in terms of money, time, experience, or other improvements in your situation |
| 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 |
| Marginal cost | what is given up by adding one more unit to an activity |
| Marginal benefit | what is gained by adding one more unit to an activity |
| Incentive | something that motivates a person to take a particular course of action |
| Market | an arrangement that brings buyers and sellers together to do business with each other |
| Invisible hand | Adam Smith’s metaphor to explain how an individual’s pursuit of economic self-interest can promote the well-being of society as a whole |
| Economic model | a simplified representation of reality that allows economists to focus on the effects of one change at a time |
| rational-behavior model | the idea that people behave in ways that are based on reason and self-interest |
| Ceteris paribus | the assumption, used in economic models, that all factors other than those being considered remain the same; from a Latin expression meaning "other things being equal" |
