Chapter 1 Flashcards
Scarcity
the limited nature of society’s resources
Economics
the study of how society manages its scarce resources
Equality
the property of distributing economic prosperity uniformly among the members of society
Opportunity cost
whatever must be given up to obtain some item
Rational people
people who systematically and purposefully do the best they can to achieve their objectives
Marginal change
a small incremental adjustment to a plan of action
Incentive
something that induces a person to act
Market economy
an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services
Property rights
the ability of an individual to own and exercise control over scarce resources
Market failure
a situation in which a market left on its own fails to allocate resources efficiently
Externality
the uncompensated impact of one person’s actions on the wellbeing of a bystander
Market power
the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices
Productivity
the quantity of goods and services produced from each unit of labor input
Inflation
an increase in the overall level of prices in the economyB
Business cycle
fluctuations in economic activity, such as employment and production
