Vocab Quiz 1 Flashcards
Economics
The study of scarcity and choice
Individual Choice
decisions by individuals about what to do, which necessarily involve decisions about what not to do.
Economy
a system for coordinating a society’s productive and consumptive activities
Market Economy
an economy in which the decisions of individual producers and consumers largely determine what, how, and for whom to produce, with little government involvement in the decisions.
Command Economy
an economy in which industry is publicly owned and a central authority makes production and consumption decisions.
Incentives
rewards or punishments that motivate particular choices.
Property rights
establish ownership and grant individuals the right to trade goods and services with each other
Marginal analysis
the study of the costs and benefits of doing alittle bit more of an activity versus a little bit less.
Resource
anything that can be used to produce something else.
Land
all resources that come from nature, such as minerals, timber, and petroleum.
Labor
The efforts of workers
Capital
manufactured goods used to make other goods and services; also called “physical capital.”
Entrepreneurship
the efforts of entrepreneurs in organizing resources for production, taking risks to create new enterprises, and innovating to develop new products and production processes.
Scarce
in short supply; when a resource is not available in sufficient quantities to satisfy all the various ways a society wants to use it
Opportunity cost
the real cost of an item: the value of the next best alternative that you must give up in order to get that item
Microeconomics
the branch of economics that studies how individuals, households, and firms make decisions and how those decisions interact.
Macroeconomics
the branch of economics that is concerned with the overall ups and downs of the economy.
Economic aggregates
economic measures that summarize data across many different markets.
Positive economics
the branch of economic analysis that describes the way the economy actually works.
Normative economics
the branch of economic analysis that makes prescriptions about the way the economy should work.
Trade-off
when you give up something in order to have something else
Production Possibilities Curve (PPC)
illustrates the trade-offs facing an economy that produces only two goods; shows the maximum quantity of one good that can be produced for each possible quantity of the other good produced
Efficient
describes a market or economy in which there is no way to make anyone better off without making at least one person worse off.
Productive efficiency
achieved by an economy if it produces at a point on its production possibilities curve.
Allocative efficiency
achieved by an economy if it produces at the point along its production possibilities curve that makes consumers as well off as possible.
Technology
the technical means for producing goods and services
Trade
when, in a market economy, individuals provide goods and services to others and receive goods and services in return.
Gains from trade
an economic principle that states that people can get more of what they want through trade than they could if they tried to be self-sufficient; this increase in output is due to specialization.
Specialization
situation in which each person specializes in the task that he or she is good at performing
Comparative advantage
the advantage conferred by an individual if the opportunity cost of producing the good or service is lower for that individual than for other people
Absolute advantage
the advantage conferred by the ability to produce more of a good or service with a given amount of time and resources; different from comparative advantage
Terms of trade
indicate the rate at which one good can be exchanged for another.
