Chapter 1 - Ten Principles of Economics Flashcards
It is the science of making decisions in the presence of scarce resources
What is Economics?
It is the the concept that resources are limited or insufficient to meet human wants and needs
What is scarcity?
It is the the value of the next best option or the value of the best alternative choice sacrificed
What is Opportunity Cost?
It is described as a person who acts in their own best self-interest causing them to try and achieve a certain set of goals
What is Rational Behavior?
The comparison of marginal benefits (MB) and Marginal Costs (MC)
What is Marginal Analysis?
- Society getting the maximum benefits from its scarce resources
- Distributing economic prosperity uniformly among the members of society
- Efficiency
2. Equality
It is something that induces a person to act
What is an Incentive?
It is a group of buyers and sellers; “same place, same time”
What is a Market?
- Scottish Economist
- The Wealth of Nations
- Invisible hand, through price system, impacts buyer/seller decisions
Who is Adam Smith and what is he known for?
When the market fails to allocate society’s resources efficiently
What is a Market Failure?
when the production or consumption of a good affects bystanders (e.g. pollution)
What is an externality?
A single buyer or seller has substantial influence on market price
Market Power
The amount of goods and services produced per unit of labor
Productivity
An increase in the overall level of prices in the economy
Inflation
