Unit 1

Word	Meaning
Economics	The study of how society allocates scarce recourses to satisfy society's unlimited wants
Scarcity	limited resources
Microeconomics	focuses on households, firms
Macroeconomics	focuses on inflation, unemployment, and economic growth
Market economy	allocates resources through the decentralized decisions of firms and households.
Economic rationality	make the best decisions for oneself using information
Perfect information	everyone knows everything with no uncertainty
Asymmetrical information	when someone knows more than someone else
Resource/factor of production/inputs	anything that can be used to make something else
Opportunity Costs	everything you have to give up to get something = highest forgone alternative + explicit costs
Explicit costs	costs you can get a receipt for (tuition)
Implicit cost/forgone alternative	costs you can't get a receipt for (missed a job at Hortons)
Marginal changes	small, incremental changes
The "invisible hand"	We all act in our own self-interest. We create a demand for goods and services that compels others to supply those goods and services in the most efficient manner. If the market is left to operate freely, the invisible hand will bring these buyers and sellers together and a price will result where buyers and sellers all benefit.
Short Run (SR)	the time period when not everything can change. Firms can't adjust their business plans to any great degree, consumers can't change their buying strategies to any great degree
Long Run (LR)	the time period when everything can change
Positive statements	statements about what actually is facts (high interest rates reduce the demand for montages)
Normative statements	opinions (the banks should raise the interest rate to discourage consumers from taking on mortgages)

Assumes people make rational decisions

Economically rational thinkers make decisions at the margin

Big 4 resources: labour, land, capital and entrepreneurship

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Last update: September 21, 2021
Created: September 18, 2021