Chapter 1 - 10 Lessons from Economics Flashcards
(21 cards)
The study of economics is best defined as…
how a society manages its scarce resources
The Economic Problem refers to…
how scarce resources cannot satisfy humans’ infinate wants and needs
Microeconomics is concerned with…
personal economic decisions and how people interact with each other
A common trade-off in an economy is between _____ and _____
efficiency and equity
The opportunity cost of a good or service is…
the best alternative you sacrifice to acquire it
Opportunity cost =
sacrifice/gain
When economists assume people are rational, this means they make decisions by…
comparing marginal benefits and costs
A marginal change refers to…
a small incremental adjustment to a plan of action
An incentive is something which…
induces someone to act
Trade allows each person to ________ in activities they are most _______ at
specialise; efficient
Trade enables people to consume a greater ______ of goods and services at a lower ____
variety; cost
Market economies are those which _______ _______ through the ________ decisions of many households and firms, as they interact in _______ for goods and services
allocate resources; decentralised; markets
Governments can improve market outcomes by enforcing _____ and protecting _________ critical to the market economy
rules; institutions
Market failure refers to when…
the market fails to allocate resources efficiently
Unregulated externalities are one potential cause of market failure. An externality refers to…
the uncompensated impact of one’s actions on the wellbeing of a bystander
Market power is a potential cause of market failure. Market power refers to…
the ability of a monopoly or oligarchy to exercise substantial influence on market prices for a good or service
Aside from unregulated externalities an market power, the other potential cause of market failure is…
an inadequate provision of unprofitable public goods or services
Variations in global living standards is primarily attributable to differences in countries’ …
productivity
Inflation refers to…
an increase in the overall level of prices in the economy
There is a _______ correlation between ________ and ________
negative; inflation; unemployment
The relationship between inflation and unemployment is best illustrated by the…
Phillip’s Curve
