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21 Cards in this Set

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