Assignment 1 Keegan Wendling Define the following words: Economics- Study of how society and individuals manage their scarce resources Microeconomics- Focus on individual people or individual businesses; or a “close up” picture, Explains how people or individuals behave Macroeconomics- Looks at the economy as a whole ; or a “big” picture View, Concentrates on factors such as unemployment, inflation, interest rates, etc. Economizing- Spend less; reduce one's expenses. Models- economic analysis, visual models, mathematical models, empirical models, and simulation models. Optimal- Combination of goods is at the point where the budget line is tangent to an indifference curve Suboptimal decisions (choices)- less than optimal : not at the best possible level suboptimal performance suboptimal conditions Utility- the want-satisfying power of a good or service; the satisfaction or pleasure a consumer obtains from the consumption of a good or service Equilibrium seeking- A state of balance or a stable situation where opposing forces cancel each other out and where no changes are occurring. Partial equilibrium- A condition of economic equilibrium which takes into consideration only a part of the market Scarcity/scarce- A situation in which unlimited wants exceed the limited resources available to fulfill those wants Efficiency- Economic state in which every resource is optimally allocated to serve each individual. Opportunity Costs- The highest valued alternative that must be given up to engage in an activity Incentive- Positive motivation Disincentive- Negative motivation Goods- Products and services that satisfy human wants directly. Services- A transaction in which no physical goods are transferred from the seller to the buyer. Markets- Any institution or mechanism that brings together buyers (demanders) and sellers (suppliers) of a particular good or service. Self interested behavior- refers to individual actions and behaviors that provoke positive personal benefitsCeteris Paribus assumption- The requirement that when analyzing the relationship between two variable-such as price and quantity demanded-other variables are held constant Positive Statements- Descriptive, Fact based statements, testable statements Normative Statements- Opinions, feelings, not testable statements Marginal costs- The additional cost of producing one more unit of a good or service Rational firm- A decision-making process that is based on making choices that result in the optimal level of benefit Supply- a schedule or curve showing the various amounts of a product that producers are willing & able to provide for sale at various prices at a given time Supply curve- graph of the relationship between the price of a good and the quantity supplied Demand-A schedule or curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time. Demand curve- graph of the relationship between the price of a good and the quantity demanded. Budget constraint- Represents all the combinations of goods and services Movement along a curve- Will occur when the price of the good changes and the quantity demanded changes in accordance to the original demand relationship. Shift of a curve- it changes the amount purchased at every price point. Equilibrium- As the price at which supply equals demand for a product, in other words where the hypothetical supply and demand curves intersect. Elasticity- A measure of how much one economic variable responds to changes in another economic variable. Surplus- Occurs when Qs > Q d, leads to a downward Pressure on price Shortage- Occurs when Quantity Demand (Qd) is greater than Quantity supply (Qs), Leads to an Upward Pressure on price Price ceiling- A legal maximum on price, tends to create shortages Price floor- A legal minimum on price, tend to create