Week 1 Flashcards
What is an opportunity cost?
something you give up to obtain it- the next best alternative. (Not a monetary cost)
Efficiency
Society gets most it can from its scarce resources.
How much output is generated with the allocation of minimum input.
Equity
how fair the benefits of resources are distributed
Marginal Cost (benefit)
The increase in total cost with one more unit of production
Sunk cost
Cost that has been paid and cannot be recovered. It is no longer relevant to decision.
Market Economy
an economy that allocates resources through decentralised decisions of firms and and households.
Advantages of a Market Economy
- Voluntary trade
- Consumer sovereignty- firms must produce what consumers want
- Productive and allocative efficiency
Market Power
Where a party has a substantial influence on market price.
Productivity
amount of goods produced from each hour of a workers time
inflation
an increase in the overall level of prices in economy
Philips Curve
Short-term trade-off between inflation and unemployment.
Positive Analysis
a descriptive and value-free statement
Normative Analysis
a statement that involves value judgement that cannot be tested- what ought to be.
