VOCAB Flashcards
Individual Choice
The decision by someone of what not to do or do.
Resources
Anything that can be used to produce something else
Opportunity cost
Real cost of an item is its opportunity cost.
What you must give up in order to get it
Trade off
Compare the costs with the benefits of doing something else
Marginal decisions
Decisions about whether to do a bit more or less of an activity
Marginal analysis
The study of decisions
Incentives
An opportunity to make themselves better off
Trade
Provide a good or service to others and receive goods and services in return
Gains from trade
Getting more of what they want
Allows us to consume more than we normally would
Specialization
An increase in output due to specialization
Person specializing in a task they’re good at performing
Equilibrium
An economics situation in which no individual would be better off doing something different
Equity
A condition in which everyone gets a fair share of
Efficiency
An economy is efficient if there are no missed opportunities
Market failure
When the state of balance tips off
(Rising in prices)
Overall spending
Amount of goods and services that consumers and business what to buy
Economic growth
The increase in living standards over time
Economy’s potential
The total amount of goods and services it can produce
Recession
Economic growth (GPP) goes down
Spending slows down and unemployment rises
Potential
Labor, physical capital, technology and education
Model
A simplified representation of a real life situation that is used to better understand real life situations
Other things equal assumption
In the development of a model, the assumption that all other relevant factors remain unchanged
Thought experiments
The most effective form of economic modeling
Simplified, hypothetical versions of real life situations
Production possibilities frontier (PPF)
A diagram that shows the combinations of two goods that are possible for a society to produce at full employment.
