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20 Cards in this Set

  • Front
  • Back
the study of how people deal with scarcity
the situation in which the quantity of resources is insufficient to meet all wants
a selection among alternative goods, services, or actions
economic interaction
exchanges of goods and services between people
an arrangement by which economic exchanges between people take place
opportunity cost
the value of the next-best forgone alternative that was not chosen because something else was chosen
gains from trade
improvements in income, production, or satisfaction owing to the exchange of goods or services
division of labor
the division of production into various parts in which different groups of workers specialize
comparative advantage
a situation in which a person or group can produce one good more efficiently than another good in comparison with another person or group
international trade
the exchange of goods and services between people or firms in different nations
production possibilities
alternative combinations of production of various goods that are possible, given the economy's resources
increasing opportunity cost
a situation in which producing more of one good requires giving up an increasing amount of production of another good
production possibilities curve
a curve showing the maximum combinations of production of two goods that are possible, given the economy's resources
market economy
an economy characterized by freely determined prices and the free exchange of goods and services in markets
command economy
an economy in which the government determines prices and production; also called a centrally planned economy
freely determined price
a price that is determined by the individuals and firms interacting in markets
property rights
rights over the use, sale, and proceeds from a good or resource
a device that motivates people to take action, usually as to increase economic efficiency
market failure
any situation in which the market does not lead to an efficient economic outcome and in which there is a potential role for government
government failure
a situation in which the government makes things worse than the market, even though there may be market failure