Economics Honors Concepts – Flashcards

the study of how people seek to satisfy their needs and wants by making choices.

limited quantities of resources to meet unlimited wants, always exists.

an alternative that we sacrifice when we make a decision.

the most desirable alternative given up as the result of a decision.

deciding whether to do or use one additional unit of some resource.

a graph that shows alternative ways to use an economy's resources.

economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services.

decisions on production and consumption of goods and services are based on voluntary exchange in markets.

central governments makes all decisions on the production and consumption of goods and services.

market-based economic system with limited government involvement.

term economists use to refer to describe the self regulating nature of the marketplace.

a Scottish social philosopher who, in 1776, published a book titled The Wealth of Nations, in which he described how the market functions. Smith observed that an economy is made up of countless individual transactions. In each transaction, the buyer and seller consider only their self-interest, or their own personal gain. In other words, self-interest is the motivating force in the free-market.

the doctrine that states that government generally should not intervene in the marketplace.

an economic system characterized by private or corporate ownership of capital goods; investments that are determined by private decision rather than by state control; and determined in a free market.

a British economist who developed a new theory of economics to explain the Depression. Keynes presented his ideas in 1936 in a book called The General Theory of Employment, Interest, and Money. John Maynard Keynes believed that to end the Great Depression, government should spend and buy more goods and services.

the dollar value of all final goods and services produced within a country's border in a given year. OR the total value of all final goods and services produced in a particular economy.

GDP per person.

a period of macroeconomic expansion followed by a period of contraction.

an economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume.

someone who would not pay for a good or service but who would get the benefits anyway if it were provided as a public good.

consumers buy more of a good when its price decreases and less when its price increases (P^ Dv)(Pv D^).

tendency of suppliers to offer more of a good at a higher price (S^ P^)(Sv Pv).

when consumers react to an increase in a good's price by consuming less of that good and more of other goods.

the change in consumption resulting from a change in real income.

a good that consumers demand more of when their income increase.

a good that consumers demand less of when their income increases.

two goods that are bought and used together.

goods used in place of one another.

describes demand that is not very sensitive to a change in price.

describes demand that is very sensitive to change in price. Elasticity - 1=unielastic, 1>inelastic, 1