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Economics
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the study of how people allocate their limited resources to satisfy their nearly unlimited wants.
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Microeconomics
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the study of the individual units that make up the economy.
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Macroeconomics
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the study of the overall aspects and workings of an economy.
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5 foundations of Economics
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incentives; trade-offs; opportunity cost; marginal thinking; trade
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Incentives
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factors that motivate a person to act or exert effort.
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Positive incentives
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incentives that encourage action and have a good result if you do it
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Negative incentives
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incentives that encourage action and have a bad result if you don't do it
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Direct incentive
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Incentive who's result is directly related to the incentive
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Indirect incentive
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Incentive who's result is indirectly related to the incentive and creates an unintended consequence
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Trade off
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A balance achieve between two desirable but incompatible options; compromise
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Opportunity cost
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the highest-valued alternative that must be sacrificed in order to get something else.
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Economic thinking
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The process of systematically evaluating a course of action
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Marginal thinking
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requires decision-makers to evaluate whether the benefit of one more unit of something is greater than its cost; requires a decision-maker to weigh the extra benefits against the extra costs.
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Markets
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bring buyers and sellers together to exchange goods and services.
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Trade
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the voluntary exchange of goods and services between two or more parties.
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Comparative Advantage
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refers to the situation where an individual, business, or country can produce at a lower opportunity cost than a competitor can.
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