Chapter 1 Flashcards
The study of how society manages its scarce resources
Economics
The limited nature of society’s resources
Scarcity
The property of society getting the most it can from its scarce materials
Efficiency
The property of distributing economic prosperity uniformly among the members of society
Equality
Whatever must be given up to obtain some item
Opportunity cost
People who systematically and purposefully do the best they can to achieve their objectives “think at the margin”
Rational people
A small incremental adjustment to a plan of action
Marginal change
Something that induces a person to act
Incentive
An economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services
Market economy
The ability of an individual to own and exercise control over scarce resources
Property rights
A situation in which a market left on its own fails to allocate resources efficiently
Market failure
The impact one person’s actions on the well-being of a bystander
Externality
The ability of a single economic factor to have a substantial influence on market prices
Market power
The quantity of goods and services produced from each unit of labor input
Productivity
An increase in the overall level of prices in the economy
Inflation
