Chapter 1 Econ Flashcards
Scarcity:
The limited nature of society’s resources
Natural resource, land and worker’s time are all limited
in its availability.
Economics is…
is about how the society manages its
limited resources.
What are the two agents
Firms and consumers
Firms:
what to produce, how much to produce, how
many workers to hire,
Consumers/Individuals:
what to purchase, how much
to save, how many hours to work
Efficiency:
getting the most out of resources.
Equity:
fairness of economic allocation
Opportunity cost:
what you give up to obtain
something
Marginal changes:
small incremental
adjustments to an existing situation or plan
Incentive:
something, such as a punishment or
reward, that induces action.
Market economy:
an economy that allocates
resources through market forces.
Market failure
refers to a situation where
allocation of recourses of market outcome is not
efficient.
Externality:
one person’s action affects bystander
positively or negatively Example: Pollution
Market power:
an ability of a single (or a small
number of) firm (or buyer) to influence market
price. Example: Monopoly
The main determinant of living standard is
productivity, the quantity of goods and services
produced from each hour of a worker’s time
