CHAPTER 1 example #45665

A situation in which unlimited wants exceed the limited resources available to fulfill those wants -which causes us to limit our consumption and make trade offs

a place where buyers and sellers meet to exchange goods and services

-People are rational -People respond to economic incentives -Optimal decisions are made at the margin

Rational individuals weigh the benefits and costs of each action, and they choose an option only if the benefits out weigh the costs.

People act in a variety of motives.

"Optimal decisions" is to continue any activity up to the point where the marginal benefit equals the marginal cost.

Analysis that involves comparing marginal benefits and marginal costs

extra or additional

The marginal benefit from the activity is equal to the marginal cost

False, there are other factors.

they use all available information as they take actions intended to achieve their goals

The idea that because of scarcity, producing more of one good or service means producing less of another good or service.

the loss of profit/benefit of something that must be given up to acquire something else

-What goods and services will be produced? -How will the goods and services be produced? -Who will receive the goods and services produced?

individuals decide the amounts of goods/services they make and is determined by the choices that consumers and people working for the firms and government make. each choice comes with an opportunity cost

Firms determine how goods and services will be produced.

Who receives the goods and services produced depends largely on how income is distributed.

An economy in which the government decides how economic resources will be allocated.

An economy in which the decisions of households and firms interacting in markets allocate economic resources.

An economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.

When a good or service is produced at the lowest possible cost.

Occurs when production is in accordance with consumer preferences.

Both the buyer and seller of a product are made better by the transaction.

The fair distribution of economic benefits

using resources in such a way as to maximize the (benefits to society) production of goods and services