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16 Cards in this Set

  • Front
  • Back
a system for coordinating society's productive activity
Market economy
an economy in which decisions about production and consumption are made by individual producers and consumers
Invisible hand (adam Smith)
the individual pursuit of self-interest can lead to good results for society as a whole
is the study of economies, at the level of both individuals and of society as a whole
the branch of economics that studies how people make decisions and how the decisions intereact
the branch of economics that is conerned with overall ups and downs in the economy
Positive economics
the branch of economic analysis that describes the economy actually works
Normative Economics
the branch of economics that makes persriptions about the way the economy should work
Scarcity Principle
the available quanitity of resource is not large enough to satisfy all productive uses
Opportunity cost principle
what you must give up in order to obtain
Rationality principle
the more the better
Principles underlying interaction of individual choices
- gains from trade
- markets move toward equilibrium
- as efficient as possible when using resources
- markets usually lead to efficiency
- when markets don't achieve efficiency, government intervention can improve society's welfare
a model is
a simplified representation of a real situation that's used to better understand real-life situations
PPF (production possibility frontier)
illustrates the trade facing an economy that produces only two goods. It shows the maximum quantity of one good that can be produced for any given production year.
comparative advantage
the opportunity cost of producing the good is lower for that individual than for other people
absolute advantage
he/she can do it better than other people