Econ ch 1 key concepts

the idea that people choose something when the advantages of doing so outweigh what you have to spend in time, money, or effort.

• Thinking at the margins principle

• cost versus benefits principle

• Cost

• positive economics

the idea that people respond to incentives in generally predictable ways

• normative economics

• Incentive

• Economics

• incentives-matter principle

the idea that many decisions involve choices about using or doing a little more or a little less of something rather than making major changes.

• Variable thinking

• Cost versus benefits principle

• incentives-matter principle

• thinking-at-the-margins principle

the branch of economics that used objective analysis to find out how the economy ACTUALLY works.

• Microeconomics

• positive economics

• normative economics

• cost-benefit analysis

Adam Smith's metaphor to explain how an individual's pursuit of economic self-interest can promote the well-being of society as a whole.

• Trade makes people better off principle

• Positive economics

• "invisible hand"

• incentives-matter principle

the general observation that the actions of people and governments always have effects that are not expected or intended.

• Cost versus benefits principle

• Law of Unintended Consequences

• Thinking at the margins

• Macroeconomics

something that motivates a person to take a particular course of action.

• Benefit

• Marginal thinking

• Incentive

• Future consequences count principle

The idea that people benefit by focusing on what they do well and then trading with others, rather than trying to do everything for themselves.

• incentives-matter principle

• Tradeoff

• Resource

• trade-makes-people-better-off principle

The branch of economics that makes value judgments about the economy; its focus is

on what economic policies SHOULD be implemented.

• Microeconomics

• positive economics

• normative economics

• cost-benefit analysis

Which of these statements is an example of normative economics?

• "Taxes ought to be lowered."

• "Inflation is higher this year."

• "The bond market is in decline."

• "Speculation caused a recession."