Economics BasicsChoices Part 1Choices Part 2Incentives Trade & Markets

This is the study of the use of scarce resources that have alternative uses. What is economics?

This branch of economics looks at economic decision-making by individuals, households, and businesses. What is microeconomics?

This branch of economics focuses on the workings of the economy as a whole. What is macroeconomics?

This type of economic study seeks to describe how things are. What is positive economics?

This type of economic study focuses on how things ought to be done by examining various options, assessing the impacts of each option, and recommending specific actions. What is normative economics?

This is what you are doing when you are choosing one alternative over another. What is making a tradeoff?

This is the “value” of the next most likely choice that you give up when making a specific choice for the use of a scarce resource. What is opportunity cost?

The acronym TANSTAAFL stands for this. What is There Is No Such Thing As A Free Lunch?

You get something for free but someone else still had to pay for it even though it was “free” to you. This scenario illustrates this economic concept. What is There Is No Such Thing As A Free Lunch (TANSTAAFL)?

You do this when you evaluate the tradeoffs of making a choice. What is evaluate the costs versus the benefits of each choice?

When you complete a cost- benefit analysis you usually choose this option. What is the one whose benefits outweigh the costs?

You are doing this type of thinking when deciding whether to add or subtract one unit of a resource. What is thinking at the margin?

The benefit you receive for adding one additional unit of a resource for a specific use is called this. What is marginal benefit?

The cost you incur for adding one additional unit of a resource for a specific use is called this. What is marginal cost?

The fact that the additional benefit you receive from each additional unit of a resource gets smaller and smaller while the cost of each additional unit gets more and more illustrates this law. What is the Law of Diminishing Marginal Utility?

This is something that encourages you to act a specific way. What is an incentive?

This is why incentives are important to the study of economics. What is people respond to incentives in generally predictable ways?

This is another term used to describe a negative incentive. What is a disincentive?

The two time frames that must be looked at when making an economic decision. What are immediate (today) and long-term (future)?

The fact that actions of people and governments usually have effects that were unexpected is referred to by this law. What is the Law of Unintended Consequences?

What must be evaluated beyond the intent of an action to determine if an action is desirable. What is the incentives (or disincentives) created by that action and whether or not the incentives and disincentives created by that action will result in unintended consequences that outweigh any potential benefits of the action?

The reasons trade makes people better off. What are we are not able to produce everything we need for ourselves, it makes more sense to focus on things we do best and trade with others for what they do best, and trade results in more and better choices than if we needed to make everything for ourselves?

This is an arrangement that brings together buyers and sellers to do businesses with each other. What is a market?

These are examples of where markets can exist. What are at a single location and in cyberspace?

This is why free markets are considered efficient. What is buyers & sellers trade until both are satisfied?