Chapter 1 - 10 Lessons from Economics Flashcards
The study of economics is best defined as…
how a society manages its scarce resources
The Economic Problem refers to…
how scarce resources cannot satisfy humans’ infinate wants and needs
Microeconomics is concerned with…
personal economic decisions and how people interact with each other
A common trade-off in an economy is between _____ and _____
efficiency and equity
The opportunity cost of a good or service is…
the best alternative you sacrifice to acquire it
Opportunity cost =
sacrifice/gain
When economists assume people are rational, this means they make decisions by…
comparing marginal benefits and costs
A marginal change refers to…
a small incremental adjustment to a plan of action
An incentive is something which…
induces someone to act
Trade allows each person to ________ in activities they are most _______ at
specialise; efficient
Trade enables people to consume a greater ______ of goods and services at a lower ____
variety; cost
Market economies are those which _______ _______ through the ________ decisions of many households and firms, as they interact in _______ for goods and services
allocate resources; decentralised; markets
Governments can improve market outcomes by enforcing _____ and protecting _________ critical to the market economy
rules; institutions
Market failure refers to when…
the market fails to allocate resources efficiently
Unregulated externalities are one potential cause of market failure. An externality refers to…
the uncompensated impact of one’s actions on the wellbeing of a bystander
