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19 Cards in this Set
- Front
- Back
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Scarcity
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A situation in which unlimited wants exceed the limited resources available to fulfill those wants
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Opportunity Cost
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The cost of the next best alternative not chosen
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Centrally Planned Economy
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An economy in which the government decides how economic resources will be allocated
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Market Economy
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An economy in which the decisions of households and firms interacting in markets allocated economic resources
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Modern "Mixed" Economy
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An economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources
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Voluntary Exchange
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A situation that occurs in markets when both the buyer and seller of a product are made better off by the transaction (emphasis on "willingness")
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Equity
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The fair distribution of economic benefits
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Productive Efficiency
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A situation in which a good or service is produced at the lowest possible cost
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Allocative Efficiency
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A state of the economy in which production is in accordance with consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it
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Ceteris paribus
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(Other Things Equal/ Constant)
It is an assumption used to analyze the relationship between two variables while the values of other variables are held unchanged |
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Marginal Cost
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The change in total cost that arises when the quantity produced changes by one unit
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Marginal Benefit
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The additional satisfaction or utility that a person receives from consuming an additional unit of a good or service
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Invisible Hand Theory
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Markets are efficient in coordinating individuals' decisions, allocating scarce resources to their best possible use
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Economic Model
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A simplified version of reality used to analyze real-world economic situations
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Economic Variable
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Something measurable that can have different values, such as the wages of software programmers
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Microeconomics
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The study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices
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Macroeconomics
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The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth
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Positive Analysis
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Analysis concerned with "what is"
Ex: Are the costs of having children related to family income? |
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Normative Analysis
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Analysis concerned with "what ought to be"
Ex: The government should be the employer of the last resort. |
