Indifference curveIn economics, an indifference curve connects points on a graph representing different quantities of two goods, points between which a consumer is indifferent. That is, any combinations of two products indicated by the curve will provide the consumer with equal levels of utility, and the consumer has no preference for one combination or bundle of goods over a different combination on the same curve. One can also refer to each point on the indifference curve as rendering the same level of utility (satisfaction) for the consumer.
MicroeconomicsMicroeconomics is a branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics focuses on the study of individual markets, sectors, or industries as opposed to the national economy as whole, which is studied in macroeconomics. One goal of microeconomics is to analyze the market mechanisms that establish relative prices among goods and services and allocate limited resources among alternative uses.
Production (economics)Production is the process of combining various inputs, both material (such as metal, wood, glass, or plastics) and immaterial (such as plans, or knowledge) in order to create output. Ideally this output will be a good or service which has value and contributes to the utility of individuals. The area of economics that focuses on production is called production theory, and it is closely related to the consumption (or consumer) theory of economics. The production process and output directly result from productively utilising the original inputs (or factors of production).
Fundamental theorems of welfare economicsThere are two fundamental theorems of welfare economics. The first states that in economic equilibrium, a set of complete markets, with complete information, and in perfect competition, will be Pareto optimal (in the sense that no further exchange would make one person better off without making another worse off). The requirements for perfect competition are these: There are no externalities and each actor has perfect information. Firms and consumers take prices as given (no economic actor or group of actors has market power).
Public economicsPublic economics (or economics of the public sector) is the study of government policy through the lens of economic efficiency and equity. Public economics builds on the theory of welfare economics and is ultimately used as a tool to improve social welfare. Welfare can be defined in terms of well-being, prosperity, and overall state of being. Public economics provides a framework for thinking about whether or not the government should participate in economic markets and if so to what extent it should do so.
Life satisfactionLife satisfaction is a measure of a person's overall well-being, assessed in terms of mood, relationship satisfaction, achieved goals, self-concepts, and self-perceived ability to cope with life. Life satisfaction involves a favorable attitude towards one's life—rather than an assessment of current feelings. Life satisfaction has been measured in relation to economic standing, degree of education, experiences, residence, and other factors. Life satisfaction is a key part of subjective well-being.
Subjective well-beingSubjective well-being (SWB) is a self-reported measure of well-being, typically obtained by questionnaire. Ed Diener developed a tripartite model of subjective well-being in 1984, which describes how people experience the quality of their lives and includes both emotional reactions and cognitive judgments. It posits "three distinct but often related components of wellbeing: frequent positive affect, infrequent negative affect, and cognitive evaluations such as life satisfaction.
Capability approachThe capability approach (also referred to as the capabilities approach) is a normative approach to human welfare that concentrates on the actual capability of persons to achieve lives they value rather than solely having a right or freedom to do so. It was conceived in the 1980s as an alternative approach to welfare economics. In this approach, Amartya Sen and Martha Nussbaum combine a range of ideas that were previously excluded from (or inadequately formulated in) traditional approaches to welfare economics.
Foundations of Economic AnalysisFoundations of Economic Analysis is a book by Paul A. Samuelson published in 1947 (Enlarged ed., 1983) by Harvard University Press. It is based on Samuelson's 1941 doctoral dissertation at Harvard University. The book sought to demonstrate a common mathematical structure underlying multiple branches of economics from two basic principles: maximizing behavior of agents (such as of utility by consumers and profits by firms) and stability of equilibrium as to economic systems (such as markets or economies).
Competitive equilibriumCompetitive equilibrium (also called: Walrasian equilibrium) is a concept of economic equilibrium, introduced by Kenneth Arrow and Gérard Debreu in 1951, appropriate for the analysis of commodity markets with flexible prices and many traders, and serving as the benchmark of efficiency in economic analysis. It relies crucially on the assumption of a competitive environment where each trader decides upon a quantity that is so small compared to the total quantity traded in the market that their individual transactions have no influence on the prices.
Invisible handThe invisible hand is a metaphor used by the Scottish moral philosopher Adam Smith that describes the inducement a merchant has to keep his capital, thereby increasing the domestic capital stock and enhancing military power, both of which are in the public interest and neither of which he intended. Some later authors have broadened this to imply the unintended greater social impacts brought about by individuals acting in their own self-interests.
