First Principles Flashcards
Resource
Anything that can be used to produce something else
Scarce
Not enough resources available
Opportunity cost
True cost of something (what you must give up in order to get it)
Trade-off
You must make a trade-off when you compare the costs with the benefits of doing something
Marginal decisions
Whether to do a bit more or a bit less of an activity
Marginal analysis
Study of marginal decisions
Individual choice
Decision by an individual of what to do
Incentive
Anything that offers rewards to people who change their behaviour
What’s an example of an incentive?
People rubber-neck at accidents on the motorway as they have already been held up due to the accident do they may as well spend some time looking at it
Trade
Provide goods/services to others and receive goods/services in return
Gains from trade
People can get more of what they want through trade than they could if they tried to be self-sufficient
Specialisation
Each Persons specialises in a task that he/she is good at performing
Equilibrium
When no individual would be better off doing something different
What’s an example of equilibrium?
When a supermarket is busy so it opens up a new checkout and people tend towards the equilibrium after initial disturbance
Efficient
A market is efficient if it takes all opportunities to make some people better off without making other people worse off
