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MicroEcon Terms Chap 1-5
Terms Chap 1-5
42
Economics
Undergraduate 1
02/22/2009

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Term
Opportunity Cost
Definition
the value of the next best alternative that must be given up because of that decison (e.g. going to school instead of going to work)
Term
Theory
Definition
a deliberate simplification of a relationship used to explain how those realationships work
Term
Correlated
Definition
two variable thatgo up or down together. Does not necessarily imply causation.
Term
Economic Model
Definition
A simplified, small-scale version of some aspect of the economy. Often expressed by graphs or equations, or given in words
Term
Abstraction
Definition
Ignoring many details so as to focus on the most important elements of a probelm.
Term
Resources
Definition
The instruments provided by nature or people that are used to create goods or services. (e.g. land, labor, capital)
Term
Optimal Decision
Definition
The choice that best serves the objectives of the decision maker. Selected by implicit or explicit comparison of the alternative choices.
Term
Outputs
Definition
The goods and services a firm provides
Term
Inputs
Definition
The resources a firm or economy uses to produce its outputs.
Term
Production Possibilities Frotier (PPF)
Definition
Shows the different combinations of various goods, any one of which a producer can turn out given the avaliable resources and existing technology.
Term
PPF
Definition
Shows the different combinations of various goods, any one of which a producer can turn out given the avaliable resources and existing technology.
Term
Principle of Increasing Costs
Definition
as the production of a good expands, the opportunity cost of producing another unit generally increases.
Term
Principle of Increasing Costs
Definition
as the production of a good expands, the opportunity cost of producing another unit generally increases.
Term
Efficient
Definition
The absence of waste, given the current technological knowledge, there is no way one could produce larger amounts of any output without using larger amounts of inputs. Working at the PPF.
Term
Allocation of Resources
Definition
Society's decisions on how to divide up its scarce input resources among the different outputs produced in the economy.
Term
Division of Labor
Definition
Breaking up a task into a number of smaller, more specialized tasks so that each worker can become more adept at a partticular job.
Term
Comparative Advantage
Definition
When one firm canproduce a good more efficently than another firm.
Term
Market System
Definition
A form of economic organization in which resources allocation decisions are left up to individual producers and consumers act in their own best interests without central direction.
Term
Inputs of Production
Definition
the labor, machinery, buildings and natural resoures used to make outputs
Term
Factors of Production
Definition
The labor, machinery, buildings and natural resoures used to make outputs
Term
Outputs
Definition
the goods and services that consumers want to acquire
Term
GDP
Definition
A measure of the size of the economy - the total amount an economy produces in a year.
Term
Gross Domestic Product
Definition
A measure of the size of the economy - the total amount an economy produces in a year.
Term
Open economy
Definition
Ecnomy where the exports and imports are a realtively large share of the GDP
Term
Closed Economy
Definition
Economy where the exports and imports are a realtively small share of the GDP
Term
Recession
Definition
A period of time where the output of a society falls
Term
Transfer Payments
Definition
Sums of money that certain individuals recieve as outright grants frin the governemnt rather than as payment for services rendered.
Term
Progressive Tax
Definition
A tax that rises and falls in relation to income.
Term
Mixed Economy
Definition
Economy with some public influence over the workings of a free market. Has both public ownership and private property.
Term
Resources
Definition
The instruments provided by nature or people that are used to create goods or services. (e.g. land, labor, capital)
Term
Opportunity Cost
Definition
the value of the next best alternative that must be given up because of that decison (e.g. going to school instead of going to work)
Term
Optimal Decision
Definition
The choice that best serves the objectives of the decision maker. Selected by implicit or explicit comparison of the alternative choices.
Term
Outputs
Definition
The goods and services a firm provides
Term
Inputs
Definition
The resources a firm or economy uses to produce its outputs.
Term
Production Possibilities Frontier
Definition
Shows the different combinations of various goods, any one of which a producer can turn out given the avaliable resources and existing technology
Term
Principle of Increasing Costs
Definition
Term
Efficiency
Definition
Term
Allocation of Scarce Resources
Definition
Term
Allocation of Scarce Resources
Definition
Term
Division of Labor
Definition
Term
Comparative Advantage
Definition
Term
Market System
Definition
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