Chapter I "Ten principles of Economics" Terms Flashcards
Where does the word “Economy” originate?
The Greek word “oikonomos,” which means “one who manages a household.” A household faces many decisions as does a whole society.
Society has limited resources and cannot meet the needs and wants of every individual.
Scarcity
The Study of how society manages scarce resources.
Economics
Society is getting maximum benefit from scarce resources
Efficiency
Resources are uniformly distributed among society
Equality
Principle where one sacrifices one thing for another
“People Face Trade-offs” (Principle 1)
Something lost when you take an alternative route
Opportunity Cost
These people do the best to systematically achieve their objectives.
Rational people
Millions or more of households and firms make the decisions
Market Economy
Govt. power to individuals and firms to control scarce resources
Property rights
A situation in which a market fails to procure an adequate or efficient amount of resources
Market failure
When one person or firm controls a scarce resource (e.g. only Town water well)
Market power
When prices rise as a result of additional cash money introduced into a given system
Inflation
Fluctuations in economic activity, such as employment and production
Business Cycle
Something outside the economy that influences it
Externality
