CH.1 FIVE FOUNDATIONS OF ECONOMICS Flashcards
The study of how individuals and societies allocate their limited resources to satisfy their nearly unlimited wants
Economics
The study of individual units that make up the economy such as households and businesses.
Microeconomics
The study of overall aspects and workings of an economy, such as inflation, growth, employment, interest rates, and the productivity of the economy as a whole.
Macroeconomics
What are the Five Foundations of Economics?
Incentives Trade-offs Opportunity cost Marginal thinking The principle that trade creates value
Factors that motivate you to act or exert effort are?
Incentives
Exist when a decision-maker has to choose a course of action.
Trade-offs
Highest valued alternative that must be sacrificed to get something else.
Opportunity cost
It requires the decision-maker to weigh the extra benefits against the extra cost
Marginal thinking
What is Circular Flow and what two groups are in it?
Circular flow shows how resources and final goods and services flow through the economy.
households & firms
Voluntary exchange of goods and services between two or more parties.
Trade
This refers to the situation in which an individual, business, or country can produce at a lower opportunity cost than a competitor can.
Comparative advantage
Involves an individual trading they already have or providing a service in exchange for something they want.
Barter
Occurs when each party in an exchange transaction has what the other party desires.
Double coincidence of wants
Systems that buyers and sellers to exchange goods and services
Markets
Purposeful evaluation of the available opportunities to make the best decision possible
Economic thinking
