Basic Concepts Flashcards
Economics
Study of scarcity and choice
Individual choice
Decisions by individuals about what to do, which involves what not to do
Economy
A system for coordinating a society’s productive and consumptive activities
Market Economy
Decisions of individual producers and consumers largely determine what, how, and for whom to produce, with little government involvement
Command Economy
Industry is publicly owned and a central authority makes production and consumption decisions
Incentives
Rewards/Punishments that motivate a particular choice
Property Rights
Establish ownership and grant individuals the right to trade goods and services with each other
Marginal Analysis
The Study of the costs and benefits of doing a little more or a little less of an activity
Resource
Anything that can be used to produce something else
Entrepreneurship
Describes the efforts of entrepreneurs in organizing resources for production, taking risks to create new enterprises, and innovating to develop new products and production values
Scarce
Something that is not available in sufficient quantities to satisfy all the various ways society wants it
Opportunity Cost
What you must give up in order to get something
Microeconomics
Study of how people make decisions and how those decisions interact
Macroeconomics
Overall ups and downs of economy
Economic Aggregates
Economic measures that summarize data across many different markets
Positive Economics
How the economy actually works
Normative Economics
How economy should work
Business Cycle
Short run alteration between economic downturns and upturns
Depression
Deep, prolonged economic downturn
REcession
Periods of economic downturns when output and employment are falling
Expansions
Recoveries, economic upturn where output and employment are rising
Employment
Number of people currently employed in the economy
Unemployment
Number of people looking for work but aren’t employed
Labor Force
Sum of employed and unemployed
Unemployment Rate
Percent of labor force that is unemployed
Output
Quantity of goods and services produced
Aggregate Output
Economy’s total production of goods and services for a given time period
Inflation
Rise in overall price
Deflation
Fall in overall prices
Price Stability
Aggregate price level changes slowly
Economic Growth
Increase in maximum amount of goods and services an economy can produce
Model
Simplified representation used to better understand a real life situation
Other Things Equal
(Ceteris Paribus) Condition in which all other relevant factors remain unchanged
Trade Off
Idea that you have to give up something for something else
PPC
Tradeoffs facing an economy that produces goods
Efficent
Condition that is satisfied when there is no way to make anyone better without making at least one person worse
Technology
Technical means for producing goods and services
Trade
Provide goods and services to others to receive in return
Gains from Trade
People get more goods/services through trade than if than if they were self sufficient
Specialization
Specializing in one skill/area that one is good at
Comparitive Advantage
Producing a good at a lower opportunity cost than others
Absolute Advantage
If a person can make more of a good with the same amount of given time and resources
Capital
Manufactured goods that are used to produce other goods
Opportunity Cost Formula
What you are sacrificing/What you are gaining
