Chapter 1 Vocab Flashcards
Scarcity
Society has limited resources and cannot produce all the goods and services People wish to have
Economics
Defined by three things:
1.Study of how society manages its scarce resources
2. Study if how people interact with one another
3. Study of the forces and trends that affect economic growth, average income, unemployment, and price rates
Efficiency
The property of society getting the most it can from uts scarce resources
(Maximize benefits)
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 what systematically and purposefully do the best they can to achieve their objectives using available opportunities
Marginal change
Describes small incremental adjustment to an existing plan of action
Emphasis in marginal benefits vs. marginal cost
Incentive
Something that induces a person to act
( punishment or reward)
Market economy
An economy that allocates resources through decentralized decisions of many firms and households as they interact in markets of goods and services
Free market
Plays into the Invisible Hand where many buyers and sellers of goods and services exist and prioritize self interest
Property rights
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 impact of one person’s or firm’s actions on the well being of a bystander
Market power
The ability of a single economic actor(s) (firms and households) to have substantial influence on market prices
Productivity
The quantity of goods and services produced from each unit of labor input
