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23 Cards in this Set
- Front
- Back
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business cycle
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fluctuations in economic activity, such as employment and production
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economics
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the study of how society manages its scarce resources
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efficiency
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the property of society getting the most it can from its scarce resources
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equity
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the property of distributing economic prosperity fairly among the members of society
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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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incentive
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something that induces a person to act
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inflation
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an increase in the overall level of prices in the economy
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marginal changes
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small incremental adjustments to a plan of action
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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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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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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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opportunity cost
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whatever must be given up to obtain some item
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productivity
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the quantity of goods and services produced from each hour of a worker’s time
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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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rational people
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people who systematically and purposefully do the best they can to achieve their objectives
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scarcity
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the limited nature of society’s resources
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The Ten Principles of Economics
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1. People face trade-offs
2. The cost of something is what you give up to get it 3. Rational people think at the margin 4. People resond to incentives 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 8. A country's standard of living depends on its ability to produce goods and services 9. Prices rise when governments print too much money 10. Society faces a short-run trade-off between inflation and unemployment |
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circular-flow diagram
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a visual model of the economy that shows how dollars flow through markets among households and firms
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macroeconomics
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the study of economy wide phenomena, including inflation, unemployment, and economic growth
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microeconomics
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the study of how households and firms make decisions and how they interact in markets
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normative statements
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claims that attempt to prescribe how the world should be
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positive statements
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claims that attempt to describe the world as it is
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production possibilities frontier
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a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology
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