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21 Cards in this Set
- Front
- Back
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scarcity
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people face trade-offs because sources are limited
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benefit-cost
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choosing one alternative over another generates both costs and benefits
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marginal analysis
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rational people make "how much" decisions at the margin
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incentive
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people make decisions by comparing costs and benefits; they respond to incentives
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opportunity cost
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the highest-valued alternative that must be given up to engage in an activity
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equity
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the fair distibution of economic benefits
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product efficieny
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the situation in which a good or servis is produced at the lowest possible cost
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allocative efficiency
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a state of the economy in which production reflects consumer prefrences; in partiuclar, every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it
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marginal cost
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the additional cost of a decision
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marginal benefit
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the additional benefit of a decision
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sunk cost
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a cost that has already been paid and cant be recovered
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Productoin Possibilities Frontier
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an economic model to deepen understanding of some of the basic principles of economics
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Gains from Trade
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inprovements in income, production or satisfaction owing to the exchange of goods and services
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Market System
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the free determination of prices and the free exchange of goods and services characterize a market economy; normally markets are a good way to organize economic activity
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comparative advantage
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the ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than other producers
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Absolute Advantage
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the ability of an individual, firm, or country to produce more of a good or service that competitors using the same amount of resources
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Property Rights
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the rights individuals or businesses have to the exclusive use of their property, including the right to buy or sell it.
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Demand and Supply Model
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this model explains why the ineraction beween the cost of production and the value to the buyer are important in understanding market activity
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Market Equilibrium
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the intersection of the supply and demand curves determines the equilibrium. Markets generally move toward equilibrium where there are no unexplited opportunities for individuals
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Changes in market Conditions
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shortages or surpluses occur when demand and or supply change, thus causing a change in the equilibrium price and equilibrium quantity
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Responsiveness
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How sensitive buyers and sellers are to changes in variables that affect demand and supply has implications for market outcomes that will deepen our understanding of the demand and supply model
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