{"id":5085,"date":"2016-07-20T21:05:28","date_gmt":"2016-07-20T21:05:28","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/microeconomics\/?post_type=chapter&p=5085"},"modified":"2016-07-20T21:05:28","modified_gmt":"2016-07-20T21:05:28","slug":"glossary-choice-in-a-world-of-scarcity","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/atd-herkimer-microeconomics\/chapter\/glossary-choice-in-a-world-of-scarcity\/","title":{"raw":"Glossary: Choice in a World of Scarcity","rendered":"Glossary: Choice in a World of Scarcity"},"content":{"raw":"

allocative efficiency <\/strong>when the mix of goods being produced represents the mix that society most desires<\/p>\n

assumption of rationality<\/strong> the assumption that people will make choices in their own self-interest, choosing things that provide the greatest personal benefit and\u00a0foregoing those that aren\u2019t as personally valuable and compelling; also called the theory of rational behavior<\/em><\/p>\n

budget constraint<\/strong> all possible combinations of goods that someone can afford, given the prices of goods, when all income (or time) is spent<\/p>\n

comparative advantage<\/strong> the ability of a group or country to produce a good or service at a lower opportunity cost than another group or country<\/p>\n

law of diminishing returns<\/strong> as additional increments of resources are devoted\u00a0to a certain purpose, the marginal benefit from those additional increments will decline<\/p>\nmarginal analysis<\/strong> comparing the costs and benefits of a little more or a little less\n\nmarginal benefit<\/strong> is the difference (or change) in what you receive from a different choice\n\nmarginal cost<\/strong> the difference (or change) in cost of a different choice\n\nnormative statements <\/strong>are subjective; they describe the world as it ought to be\n\nopportunity cost<\/strong> is the value of the next best alternative\n\npositive statements <\/strong>are objective; they describe the world as it is\n

production possibilities frontier (or curve)<\/strong> a diagram that shows the productively efficient combinations of two products that an economy can produce given the resources it has available<\/p>\n

productive efficiency<\/strong> when it\u2019s impossible to produce more of one good (or service) without decreasing the quantity produced of another good (or service)<\/p>\nsunk costs<\/strong>\u00a0costs that are\u00a0incurred in the past and can\u2019t be recovered","rendered":"

allocative efficiency <\/strong>when the mix of goods being produced represents the mix that society most desires<\/p>\n

assumption of rationality<\/strong> the assumption that people will make choices in their own self-interest, choosing things that provide the greatest personal benefit and\u00a0foregoing those that aren\u2019t as personally valuable and compelling; also called the theory of rational behavior<\/em><\/p>\n

budget constraint<\/strong> all possible combinations of goods that someone can afford, given the prices of goods, when all income (or time) is spent<\/p>\n

comparative advantage<\/strong> the ability of a group or country to produce a good or service at a lower opportunity cost than another group or country<\/p>\n

law of diminishing returns<\/strong> as additional increments of resources are devoted\u00a0to a certain purpose, the marginal benefit from those additional increments will decline<\/p>\n

marginal analysis<\/strong> comparing the costs and benefits of a little more or a little less<\/p>\n

marginal benefit<\/strong> is the difference (or change) in what you receive from a different choice<\/p>\n

marginal cost<\/strong> the difference (or change) in cost of a different choice<\/p>\n

normative statements <\/strong>are subjective; they describe the world as it ought to be<\/p>\n

opportunity cost<\/strong> is the value of the next best alternative<\/p>\n

positive statements <\/strong>are objective; they describe the world as it is<\/p>\n

production possibilities frontier (or curve)<\/strong> a diagram that shows the productively efficient combinations of two products that an economy can produce given the resources it has available<\/p>\n

productive efficiency<\/strong> when it\u2019s impossible to produce more of one good (or service) without decreasing the quantity produced of another good (or service)<\/p>\n

sunk costs<\/strong>\u00a0costs that are\u00a0incurred in the past and can\u2019t be recovered<\/p>\n\n\t\t\t

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Candela Citations<\/h3>\n\t\t\t\t\t
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