Unit 1 (Principles of Economics) Flashcards
What is marginal benefit?
What you get for one more of that good
What is opportunity cost?
the loss of potential gain from other alternatives when one alternative is chosen
What are trade offs?
when you choose one thing, you are going to lose another
What do incentives cause?
unintended consequences
What is the invisible hand of the marketplace?
It leads firms and households interacting with the market to desired outcomes
What are the two main causes of market failure?
Externality and market power
What is externality?
Aside effect or consequence of an activity that is not reflected in the cost of that activity
What is market power?
The level of ability a country has to control prices of a product (example: Canada has only 3 telemarketing services)
Why is productivity important?
Productivity = better standard of living, health care, longer life expectancy, luxury, etc.
What is inflation?
The overall increase of prices within the economy
What causes inflation?
When a country produces too much money (the more money produced the less value it holds)
How are inflation and unemployment related?
Both of these things are part of the business cycle meaning they are both irregular and unpredictable activities
When unemployment is low…
inflation and prices go up to keep up with high demand
When unemployment is high…
prices and inflation decrease because demands for goods for lower
Define efficiency
When a society is getting the most from their resources
Define property rights
The ability of an individual to own and exercise control over scarce resources
Define a monopoly
When there is only one seller in the market
Define equality
The property of distributing economic prosperity uniformly among society’s members
Define rational
Doing the best you can to achieve objectives
Define marginal change
An incremental adjustment to an existing plan
Economics is the study of…?
How society manages its scarce resources
A rational person does not act unless.. (hint: marginal)
The action produces marginal benefits that exceed marginal costs
What happens when a country raises taxes and increases welfare payments
improves equality at the expense of efficiency
What is the benefit of foreign trade?
It allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home
