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26 Cards in this Set
- Front
- Back
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Principle 1 |
People face trade-offs Common one is between efficiency and equality. |
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Principle 2 |
The cost of something is what you give up to get it. |
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Principle 3 |
Rational people think at the margin |
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Principle 4 |
People respond to incentives |
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Principle 5 |
Trade can make everyone better off |
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Principle 6 |
Markets are usually a good way to organize economic activity |
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Principle 7 |
Governments can sometimes improve market outcomes |
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Principle 8 |
A country's standard of living depends on its ability to produce goods and services |
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Principle 9 |
Prices rise when the government prints too much money |
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Principle 10 |
Society faces a short-run trade-off between inflation and unemployment |
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Scarcity |
society has limited resources and therefore cannot produce all the goods and services people wish to have. |
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Economics |
the study of how society manages its scarce resources. Economists study how people make decisions. |
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Efficiency |
the property of society getting the most it can from its scarce resources. |
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Equality |
the property of distributing economic prosperity uniformly among the members of society. |
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Opportunity Cost |
whatever must be given to obtain some item |
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Rational People |
people who systematically and purposefully do the best they can to achieve their objectives |
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Marginal Change |
a small incremental adjustment to a plan of action |
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Incentive |
something that induces a person to act |
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Market Economy |
an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services. |
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Property Rights |
the ability of an individual to own and exercise control over scarce resources. |
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Market Failure |
a situation in which a market left on its own fails to allocate resources efficiently
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Externality |
the impact of one person's actions in the well-being of a bystander |
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Market Power |
the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices. |
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Productivity |
the quantity of goods and services produced from each unit of labor input |
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Infaltion |
an increase in the overall level of prices in the economy
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Business Cycle |
fluctuations in economic activity, such as employment and production |
