Chapter 1 - 10 Principals of Economics Flashcards
1
Q
Scarcity
A
- limited nature of society’s resources
2
Q
Economics
A
- the study of how people, firms, and societies decide to allocate resources
3
Q
Microeconomics
A
- studies the behavior of Consumers and Producers
4
Q
Efficiency
A
- when society gets the most from its scarce resources
5
Q
Equity
A
when prosperity is distributed more ‘fairly’ among society’s members
6
Q
Opportunity Cost
A
the cost of the next best alternative
7
Q
Marginal Changes
A
small incremental changes
8
Q
Incentive
A
something to induce a person to act
- a reward or punishment
- rational people respond to incentives
9
Q
Market
A
- group of buyers and sellers
10
Q
Market Economy
A
- allocates resources through the decentralized decisions of many households and firms as they interact in markets
11
Q
Role of State
A
- enforce property rights
- may intervene to promote equity
12
Q
Market Failure
A
- a situation where a market is left on its own and fails to allocate resources correctly
13
Q
Exeternalities
A
- an example of Market Failure
- when production of consumption of a good affects bystanders (e.g. pollution)
14
Q
Market Power
A
- an example of Market Failure
- a single buyer has substantial influence on market price (e.g. monopoly)
15
Q
Productivity
A
- the total amount of goods and services produced from each hours of a worker’s time
