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23 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Scarcity
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Society had limited resources
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Economics
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The study of how society manages its scare resources
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Principle 1
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People Face Trade-Offs
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Society faces a trade off between efficiency and equality
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Efficiency
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Society is getting the maximum benefits from its scarce resources
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Equality
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Those benefits are distributed uniformly among society's members
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Principle 2
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Cost is what you give up to get it
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Opportunity cost
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what you give up to get an item; principle 2
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Principle 3
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Rational people think at the margin
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Rational People
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systematically and purposefully do the best they can to achieve their objectives, given available opportunities
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Marginal change
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small incremental adjustment to an existing plan of action
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Principle 4
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People respond to incentives
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Incentive
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something that induces a person to act; rational people respond to incentives
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Principle 5
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Trade can make everyone better off
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Trade
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allows countries to specialize in what they do best and to enjoy a greater variety of goods and services
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Principle 6
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Markets are usually a good way to organize economic activity
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Market economy
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the decisions of a central planner are replaced by the decisions of millions of firms and households
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Adam Smith
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An inquiry into the nature and causes of the wealth of nations; "invisible hand"
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Principle 7
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Governments can sometimes improve market outcomes
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property rights
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the ability of an individual to own and exercise control over scarce resources
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Market failure
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a situation in which a market left on its own fails to allocate resources efficiently
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The 2 causes of market failure
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externality and market power
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externality
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the impact of one person's actions on the well being of a bystander
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market power
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the ability of a single economic person to have a substantial influence on market prices
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