Chapter 1

Front 1

How people make decisions

Back 1

1) people face tradeoffs.
2) the cost of something is what you give up to get it.
3) Rational people think at the margin.
4) People respond to incentives.

Front 2

How people interact

Back 2

5) Trade can make everyone better off.
6) Markets are usually a good way to organize economic activity.
7) Governments can sometimes improve market outcomes.

Front 3

How the economy as a whole works

Back 3

8) A country's standard of living depends on its ability to produce goods and services.
9) Prices rise when the government prints to much money.
10) Society faces a short-run tradeoff between inflation and unemployment.

Front 4

The fundamental lessons about individual decision making are that people face tradeoffs among alternative goals, that the cost of any action is measured in terms of forgone opportunities, that rational people make decisions by comparing marginal costs and marginal benifits, and that people change their behavior in response to incentives they face.

Back 4

The fundamental lessons about interactions among people are that trade can be mutually beneficial, that markets are usaully a good way of coordinating trade among people, and that the government can potentially improve market outcomes if there is some market failure or if the market outcome is inequitable.

Front 5

The fundamental lessons about the economy as a whole are that productivity is the ultimate source of living standards, that money growth is the ultimate source of inflation, and that society faces a short-run tradeoff between inflation and unemployment.

Back 5

SUMMARY

Front 6

Scarcity

Back 6

the limited nature of society's resources.

Front 7

Economics

Back 7

the study of how society manages its scare resouces.

Front 8

Efficiency

Back 8

the property of society getting the most it can from its scare resources.

Front 9

Equity

Back 9

the property of distributing economic prosperity fairly among the members of society.

Front 10

Opportunity Cost (OC)

Back 10

whatever must be given up to obtain some item.

Front 11

Rational People

Back 11

ppl who systematically & purposfully do the best they can to achieve their objectives.

Front 12

Marginal Changes

Back 12

small incramental adjustments to a plan of action.

Front 13

Incentive

Back 13

something that induces a person to act.

Front 14

Market Economy

Back 14

an economy that allocates resource through the decentralized decisions of many firms and households as they interact in markets for goods and services.

Front 15

Property Rights

Back 15

the ability of an individual to won and excercise control over a scarce resource.

Front 16

Market Failure

Back 16

a situation in which a market left on its own fails to allocate resources efficiently.

Front 17

Externality

Back 17

the impact of 1 person's actions on the well-being of a bystander.

Front 18

Market Power

Back 18

the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices.

Front 19

Productivity

Back 19

the quantity of goods and services produced from each hr of a worker's time.

Front 20

Inflation

Back 20

an increase in the overall level of prices in the economy.

Front 21

Business Cycle

Back 21

fluctuations in economic activity, such as employment and production.