Module 1-4 Vocab Flashcards
Economics
The study of scarcity and choice
Individual Choice
decisions by individuals about what to do
Economy
system for coordinating a society’s productive and consumptive actvities
Market Economy
decisions on what to produce is made by producers and consumers. Not government
Command Economy
Industry is publicly owned and central government makes decisions on what is produced
Incentives
Rewards or punishments that motivate particular choices
Property rights
Grant individuals the right to trade goods and services with each other
Marginal analysis
Study of the costs and benefits of doing a little bit more of an activity versus a little bit less
Resource
Anything that can be used to produce something else
Land
Resources that come from nature
 Labor
Effect of workers
 Capital
Manufactured goods used to make other goods and services
Entrepreneurship
Effort of entrepreneurs in organizing resources, taking risks, and innovation
Scarce resource
Not enough of the resources to satisfy demand
Opportunity cost
What is given up in order to receive an item
 microeconomics
Study of how individuals make decisions
Macroeconomics
Study of overall ups and downs of the economy
Economic Aggregates
Measures that summarize data across different markets
Positive economics
The way the economy actually works
Normative economics
How the economy should work
Business cycle
Alteration between recession and expansions
 depression
 Long period of economic downturn
Recession
Period of economic downturn
 expansion
Period of economic up turn
 employment
Number of people who are working
 unemployment
Number of people who are looking for work but are not employed
Labor force
 sum of employment and unemployment
Unemployment rate
Percentage of the labor force unemployed 
Aggregate output
Total production of goods and services
Inflation
Overall rising price level
 deflation
Overall falling price level
Price stability
Overall price level doesn’t change
Economic growth
 increase in maximum amount of goods and services in economy produce
Model
Simplified representation used to understand a real life situation
Other things equal assumption
Only one factor changed
Trade off
Giving up something to gain something
Efficient economy
No way to make anyone better off without making at least one person worse off
Productive efficiency
Produces at a point on the PPC
Allocative efficiency
Produces on a point of the piece of PC that makes consumers as well off as possible
 Technology
Technical means for producing goods and services
Gains from trade
 getting more of something than what they could produce themselves
Compared advantage
Producing a gooder service at an opportunity cause lower than others
Absolute advantage
Being able to produce the most of a good in the least amount of time
Terms of trade
The rate at which one good can be exchanged for others
