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Economic agent
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an individual or a group that makes choices
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Economics
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the study of how agents choose to allocate scarce resources and how those choices affect society. The study of choice.
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First principle of economics
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people try to optimize; choose the best available option
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Second principle of economics
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economic systems tend to be in equilibrium, a situation where nobody would benefit by changing his/her own behavior
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Third principle of economics
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Empiricism - analysis that uses data.
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Scarce resources
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things that people want, where the quantity that people want exceeds the amount that is actually available.
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Scarcity
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situation of having unlimited wants in a world of limited resources.
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Positive economics
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describes what people actually do. Can be verified with data.
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Normative economics
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recommends what an individual or society ought to do.
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Microeconomics
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study of how individuals, households, firms, and governments make choices, and how those choices affect prices, the allocation of resources, and the well being of other agents.
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Macroeconomics
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study of the economy as a whole.
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optimization
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trying to choose the best option, given the available information.
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Equilibrium
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situation where everyone is simultaneously optimizing, which would lead to no personal benefits.
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Empiricism
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analysis that uses data.
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trade-off
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an economic agent giving up one thing to gain another.
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Budget constraint
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shows the goods or services that a consumer can choose from given their limited budget.
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Opportunity cost
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best alternative use of a resource.
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cost-benefit analysis
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calculation that adds up costs and benefits using a common unit of measurement, like dollars. Helps to compare a set of feasible alternatives and pick the best one.
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