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27 Cards in this Set
- Front
- Back
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Scarcity |
The limited nature of society's resources. |
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Economics |
The study of how society manages its scarce resources. |
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Principle 1: |
People Face Trade-Offs |
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Efficiency |
The property of society getting the most it can from it's scarce resources. |
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Equality |
The property of distributing economic prosperity uniformly among the members of society. |
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Principle 2: |
The cost of something is what you give up to get it |
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Opportunity Cost |
Whatever must be given up to obtain some item. |
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Principle 3: |
Rational people think at the margin |
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Rational people |
People who systematically and purposefully do the best they can to achieve their objectives. |
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Marginal change |
A small incremental adjustment to a plan of action. |
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Principle 4: |
People respond to incentives |
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Incentive |
Something that induces a person to act. |
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Principle 5: |
Trade can make everyone better off |
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Principle 6: |
Markets are usually a good way to organize economic activity |
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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. |
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Principle 7: |
Governments can sometimes improve market outcomes |
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Property Rights |
The ability of an individual to own and exercise control over scarce resources. |
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Externality |
The impact of one person's actions on the well-being of a bystander. |
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Market Power |
The ability of a single economic actor (or small group of actors) to have a substantial influence on market prices. |
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Market Failure |
A situation in which a market left on its own fails to allocate resources efficiently. |
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Adam Smith's "invisible hand" refers to: |
The ability of free markets to reach desirable outcomes, despite the self-interest of market participants. |
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Principle 8: |
A country's standard of living depends on its ability to produce goods and services |
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Productivity |
The quantity of goods and services produced from each unit of labor input. |
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Principle 9: |
Prices rise when the government prints too much money |
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Inflation |
An increase in the overall level of prices in the economy. |
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Principle 10: |
Society faces a short-run trade-off between inflation and unemployment |
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Business cycle |
Fluctuations in economic activity, such as employment and production. |
