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23 Cards in this Set
- Front
- Back
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Scarcity
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the limited nature of society's resources
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The Study of how society manages its scarce resources
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Economics
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Ten Principles of Economics
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HOW PEOPLE MAKE DECISIONS
1. People face Trade-Offs 2.The <b>cost</b> of something, is what you give up to Get it. 3.Rational People think at the Margin 4. People respond to incentives HOW PEOPLE INTERACT WITH EACHOTHER 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 HOW THE ECONOMY WORKS AS A WHOLE 8. A Country's standard of living depends on its ability to produce Goods & Services 9.Prices rise when the Government prints to much money 10. Society faces a short-run trade off between inflation and unemployment |
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One of the Trade-offs any economy encounters is the trade off between efficiency and equality
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True.
Efficiency: society is getting the max benefits from its scarce resources <b>Equality:</b>the benefits are distr. uniformly among society's members Efficiency refers to the size of the "economic pie" while equality is how the pie is distributed in individual slices |
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People are likely to make good decisions only if they understand their options available.
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True
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Opportunity Cost
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Whatever must be given up to get an item
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Rational People
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people who systematically and purposefully do the best they can to achieve their objectives
people who realize that decisions in life are rarely black and white but usually shades of gray |
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Marginal Changes
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Small incremental adjustments to a plan of action to obtain a desired result/objective
i.e. the decision is not between whether to blow a test off or study 24 hours a day for it. but whether or not to watch TV for an hour or review your notes some more |
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Margin
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"edge"
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Rational People usually make decisions by comparing 2 things
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marginal benefits and marginal costs
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Review pg. 6
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yes
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Incentive
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something that induces a person to act
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Market Economy
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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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Prices are the instrument that the invisible hand uses to work its magic
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true
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Property rights
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The ability of an individual to own and exercise control over scarce resources
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Market Failure
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a situation in which a market left on its own fails to allocate resources efficiently
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Externality
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The impact of one person's actions on the well-being of a bystander
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Market Power
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the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices
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Almost all variation in living standards is attributable to differences in countries' <b>productivity</b>
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True.
Productivity: the quantity of goods and services produced from each unit of labor input |
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What determines the average growth rate of its average income?
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the nation's growth rate of productivity
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Inflation
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an increase in the overall level of prices in the economy
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The Injection of monetary injections into the economy produce the following short-run effects:
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stimulates the overall level of spending and thus the demand for goods and services
Higher demand may over time cause firms to rasie their prices, but in the meantime, it also encourages them to hire more workers and produce a larger quantity of goods and services more hiring means lower unemployment |
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Business cycle
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Fluctuations in economic activity, such as employment and production
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