Chapter 1 Flashcards
(19 cards)
SCARCITY
Limited nature of society’s resources
Economics
Study of how society manages it’s scarce resources
Efficiency vs Equality
Efficiency: When society gets the most out of its scarce resources
Equality: When prosperity is distributed uniformly among society’s members
Opportunity Cost
Cost of any item is whatever must be given up to obtain it
Market
A group of buyers and sellers
Market Economy
Allocates resources through the decentralized decisions of many households and firms as they interact in markets
Market Failure
When the market fails to allocate society’s resources efficiently
Externalities
When the production or consumption of a good affects bystanders
Market Power
A single buyer or seller has substantial influence on market price
Inflation
Increases in the general level of prices- excessive growth in the quantity of money which causes value of money to fall- controlled by GOVT
PRINCIPLES OF ECONOMICS: #1
People face TRADEOFFS: More money = Working harder/ longer
PRINCIPLES OF ECONOMICS: #2
The cost of something is what you give up to get it. Comparing cost VS Benefit
PRINCIPLES OF ECONOMICS: #3
Rational People Think at the Margin: Systematically and purposefully do their best in order to achieve their objectives
PRINCIPLES OF ECONOMICS: #4
People respond to incentives: Prospect of reward
PRINCIPLES OF ECONOMICS: #5
Trade can make everyone better off: Exchange for goods and services
PRINCIPLES OF ECONOMICS: #6
Markets help organize economic activity through the price system.
PRINCIPLES OF ECONOMICS: #7
Governments Can sometimes improve market outcomes; government can promote efficiency and equity
PRINCIPLES OF ECONOMICS: #8
A counties standard of living is based on their ability to produce goods and services: Productivity level
PRINCIPLES OF ECONOMICS: #9
Prices rise when the government prints too much money: Inflation
