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23 Cards in this Set

  • Front
  • Back
business cycle
fluctuations in economic activity, such as employment and production
the study of how society manages its scarce resources
the property of society getting the most it can from its scarce resources
the property of distributing economic prosperity fairly among the members of society
the impact of one person’s actions on the well-being of a bystander
something that induces a person to act
an increase in the overall level of prices in the economy
marginal changes
small incremental adjustments to a plan of action
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
market failure
a situation in which a market left on its own fails to allocate resources efficiently
market power
the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices
opportunity cost
whatever must be given up to obtain some item
the quantity of goods and services produced from each hour of a worker’s time
property rights
the ability of an individual to own and exercise control over scarce resources
rational people
people who systematically and purposefully do the best they can to achieve their objectives
the limited nature of society’s resources
The Ten Principles of Economics
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
circular-flow diagram
a visual model of the economy that shows how dollars flow through markets among households and firms
the study of economy wide phenomena, including inflation, unemployment, and economic growth
the study of how households and firms make decisions and how they interact in markets
normative statements
claims that attempt to prescribe how the world should be
positive statements
claims that attempt to describe the world as it is
production possibilities frontier
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