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Chapter One

Why study Economics?

To learn a way of thinking, to understand society, to understand Global AffairsTo be an informed voter


The study of how individuals and societies choose to use the scarceresources that nature and previous generations have provided

Opportunity cost:

That which we for go, or give up, when we make a choice or adecision

Sunk cost

: Costs that can not be avoided, regardless of what is done in the future,because they have already been incurred.

 Efficient Market:

A Market in which profit opportunities are eliminated almost instantaneously.

 Industrial Revolution:

The period in England during the late eighteenth and earlynineteenth centuries in which new manufacturing technologies and improvedtransportation gave rise to the modern factory system and a massive movement of the population from the countryside to ht cities.


The branch of economics that examines the functioning of individual industries and the behavior of individual decision-making units that is,fussiness firms and households.

  Macro economics:

The branch of economics that examines the economicbehavior of aggregates- income, employment, output , and so on- on a nationalscale.


 Positive economics:

an approach to economics that seeks to understand behaviorand the operation of systems without making judgments. It describes what existsand haw it works.

 Normative Economics

: an approach to economics that analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe courses of action, also called policy economics.

 Descriptive economics:

the compilation of data that describe phenomena and facts

 Economic theory

: A statement or set of related statements about cause and effect,action and reaction.


: A formal statement of a theory. Usually a mathematical statement of presumed relationship between two or more variables.


: A measure that can change from time to time or from...