Chapter One: Ten Principles of Economics Flashcards
Scarcity
The limited nature of society’s resources
Economics
The study of how society manages its scarce resources
Efficiency
The property of a resource allocation of maximizing the total surplus received by all members of society
Equity
The fairness of the distribution of well-being among the members of society
Opportunity Cost
Whatever must be given up to obtain some item
Rational People
Those who systemically and purposefully do the best they can to achieve their objectives
Marginal Changes
Small incremental adjustments to a plan of action
Incentive
Something that induces a person to act
Market Economy
An economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services
Property Rights
The 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 impacts of one person’s actions on the well-being of a bystander
Market Power
The ability of a single economic actor (or small group of actors) to have a substantial influence on market prices
Productivity
The quantity of goods and services produced from each hour of a worker’s time
Inflation
An increase in the overall prices in the economy
