Economics Ch. 1 Vocabulary By: Nathan Spell

economics  the social science concerned with the efficient use of scarce resources to achieve the maximum satisfaction of economic wants

economic perspective  economic way of thinking

marginal analysis  comparisons of marginal benefits and marginal costs (“marginal” means “extra,” “additional,” or “a change in.”)

scientific method  the procedure for the systematic pursuit of knowledge involving the observation of facts and the formulation and testing of hypotheses to obtain theories, principles, and laws.

theoretical economics  the process of deriving and applying economic theories and principles

principles  economic principles are statements about economic behavior of the economy that enable prediction of the probable effects of certain actions

generalizations  statement of the nature of the relationship between two or more sets of facts

other-things-equal assumption  the assumption that factors other than those being considered are held constant

policy economics  the formulation of courses of action to bring about desired economic outcomes or to prevent undesired occurrences

economic growth  the production of more and better goods and services  the development of a higher standard of living

full employment  the provision of suitable jobs for all citizens who are willing and able to work

economic efficiency  the achievement of the maximum fulfillment of wants using the available productive resources.

price-level stability  avoid large upswings and downswings in the general price level; that is, avoid inflation and deflation

economic freedom  guarantee that businesses, workers, and consumers have a high degree of freedom in their  economic activities.

equitable distribution of income  ensure that no group of citizens faces poverty while most others enjoy abundance

economic security  provide for those who are chronically ill, disabled, laid off, aged, or otherwise unable to earn minimal levels of income

balance of trade  seek a reasonable overall balance with the rest of the world in international trade and financial transactions

tradeoffs  the achievement of a goal at the sacrifice of another

macroeconomics  examines either the economy as a whole or its basic subdivisions or aggregates, such as the government, household, and business sectors

aggregate  a collection of specific economic units treated as if they were one unit

microeconomics  looks at specific economic units

positive economics  the analysis of facts or data to establish scientific generalizations about economic behavior

normative economics  the part of economics involving value judgments about what the economy should be like; focused on which economic goals and policies should be implemented; policy economics

fallacy of composition  the false notion that what is true for the individual (or part) is necessarily true for the group (or whole)

“after this, therefore because of this,” fallacy  example: rooster crows before the sun rises, but the crow of the rooster doesn’t cause the sun to rise.  In other words, an event isn’t necessarily caused by an event that occurs prior

Works Cited -Campbell, Stanley. Economics, 15 th ed. - marginal-analysis.gif now-available/image - h.schools.nsw.edu.au/Science/CommonFolder/index_files/E1_Scientifi cMethod.gif - content/uploads/2009/04/positive_economic_growth.jpg AG297_angell_ gif - index_2008.gif -