Economics & Its Nature (And Principles) Flashcards
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Free goods
This is an explanation of why-things are as
they are.
Theory
a situation in which a market left on its own fails to allocate resources efficiently.
market failure
“There ain’t no such thing as a free lunch.”
People Face Trade-offs
fluctuations in economic activity, such as
employment and production
business cycle
-scarce or limited and have price.
Economic goods
In the long run, inflation is almost always caused by excessive growth in the quantity of money, which causes the value of money to fall.
Prices Rise When the
Government Prints Too Much Money
people who systematically and purposefully do the best they can to achieve their objectives.
Rational people
Rather than being self-sufficient, people can specialize in producing one good or service and exchange it for other goods.
Trade Can Make Everyone Better Off
means that those benefits are distributed uniformly among society’s members.
Equality
this refers to a tool used by economists to
explain economic phenomena. It uses assumptions to
simplify reality.
Model
This is experienced when firms are able to reduce
the per unit cost of producing the output. In simple
terms, the firm maximizes the output at lowest
possible cost.
Economic Efficiency
What the Diagram Omits?
Government, Financial, and Foreign
a small incremental adjustment to a plan of action
Marginal change
something that induces a person to act (e.g. rewards or punishments)
Incentive
refer to tangible and intangible things that
can satisfy human wants. Examples of these are:
Food, shelter, services.
Goods
increases in the general level of prices.
Inflation
Public policy may promote efficiency.
Governments Can Sometimes Improve Market Outcomes
a group of buyers and sellers (need not be in a single location)
Market
the ability of a single economic actor (or small
group of actors) to have a substantial influence on market prices
market power
the ability of an individual to own and exercise control over scarce resources
property rights
an economy that allocates resources through
the decentralized decisions of many firms and households as they interact in markets for goods and services
market economy
the amount of goods and services produced
per unit of labor.
Productivity
the impact of one person’s actions on the well-being of a bystander
Externality
