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11 Cards in this Set
- Front
- Back
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A situation in which unlimited wants exceed the limited resources available to fulfill those wants.
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Scarcity
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The study of the choices people make to attain their goals, given their scarce resources.
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Economics
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A simplified version of reality used to analyze real-world economic situations.
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Economic model
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A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade.
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Market
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What are the three key economic ideas?
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1. People are rational
2. People respond to economic incentives. 3. Optimal decisions are made at the margin. |
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Analysis that involves comparing marginal benefits and marginal costs.
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Marginal analysis
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The idea that because of scarcity, producing more of one good or service means producing less of another good or service.
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Trade-off
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The highest-valued alternative that must be given up to engage in an activity.
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Opportunity cost
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Trade-offs force societies to make choices when answering these three fundamental questions:
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1. What goods and services will be produced?
2. How will the goods and services be produced? 3. Who will receive the goods and services produced? |
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An economy in which the government decides how economic resources will be allocated.
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Centrally planned economy
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An economy in which the decisions of households and firms interacting in markets allocate economic resources.
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Market economy
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