Chapter 1 Flashcards
(15 cards)
Describes a market or economy that takes all opportunities to make some people better off without making other people worse off.
Efficient
An economic situation in which no individual would be better off doing something different.
Equilibrium
Fairness; everyone gets his or her fair share. Since people can disagree about what’s “fair,” equity isn’t as well defined a concept as efficiency.
Equity
An economic principle that states that by dividing tasks and trading, people can get more of what they want through trade than they could if they tried to e self sufficient.
Gains from trade
Anything that offers rewards to people who change their behavior.
Incentive
The decision by an individual of what to do, which necessarily involves a decision of what not to do.
Individual choice
(of choices) my choices affect your choices, and vice versa; a feature of most economic situations. The results are often quite different from what the individuals intended.
Interaction
The study of marginal decisions.
Marginal analysis
A decision made at the “margin” of an activity to do a bit more or a bit less of that activity
Marginal decision
The real cost of an item; what you must give up in order to get it.
Opportunity cost
Anything, such as land, labor, and capital, that can be used to produce something else; includes natural (from physical environment) and human (labor, skill, intelligence)
Resources
in short supply;not enough available to satisfy all the various ways a society wants to use it.
Scarce
A situation in which different people each engage in the different task that he or she is good at performing.
Specialization
When individuals provide goods and services to others and receive goods and services in return.
Trade
A comparison of the costs and benefits of doing something.
Trade-off
