Week 1 Flashcards
(11 cards)
People face tradeoffs
Policies to give unemployment benefit or ask wealthy people to pay tax
Effeciency:
Property of society getting the most it can from it’s scarce resources
Equity:
The property of distributing economic prosperity fairly among members of society
Opportunity Cost
The best alternative that must be given up to obtain some item
Marginal change
Small incremental adjustment to plan or action
People respond to incentives
A higher price in market provides an incentive for buyers to consume less and for sellers to produce more
Invisible hand
Idea that buyers and sellers interact in a market economy will create an outcome that allocated goods and services to those people who value them the most
Property rights
The ability of an individual to own and exercise control over scarce resources
Market failure
A situation in which a market left on it’s own fails to allocate resources efficiently
What is the goal of economic policy makers
To keep inflation at low level, high inflaction imposes costs on society, growth in quantity of money causes inflation, more of it, less value
Phillips curve
Short term trade-off between inflation and unemployment
Trade-off arises because prices are slow to adjust
