Econ 170 Principles of Economics – Flashcards
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Economics
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The study of how society manages its scare resources
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Efficiency
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The property of society getting the most it can from its scarce resources.
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Equality
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The property of distributing economic prosperity uniformly among the members of society.
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Opportunity cost
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Whatever must be given up to obtain some item.
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Rational People
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People who systematically and purposefully do the best they can to achieve their objectives.
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Marginal Change
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A small incremental adjustment to a plan of action.
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incentive
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Something that induces a person to act.
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Market Economy
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An economy that allocates its resources through the decentralized decisions of many firms and households as they interact in markets for goods and services.
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Property rights
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The ability of an individual to own an exercise control over scarce resources.
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Market Failure
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A situation in which a market left on its own fails to allocate resource efficiently.
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Externality
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The impact of one person's actions on the well-being of a bystander.
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Market Power
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The ability of a single economic actor (or small group of actors) to have substantial influence on market prices.
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Productivity
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The quantity of goods and services produced from each unit of labor input.
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Inflation
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An increase in the overall level of prices in the economy.
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Business cycle
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Fluctuations in economic activity, such as employment and production.
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Economics is best defined as the study of?
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How society manages its scarce resources
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Your opportunity cost of going to a movie is?
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The total cash expenditure needed to go to the movie plus the value of your time.
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A marginal change is one that?
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Incrementally alters an existing plan.
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Adam Smith's "invisible hand" refers to?
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The ability of free markets to reach desirable outcomes, despite the self-interest of market participants.
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Governments may intervene in a market economy in order to?
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Protect property rights, correct market failure due to externalities, and achieve a more equal distribution of income.
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If a nation has high and persistent inflation, the most likely explanation is?
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The central bank is creating excessive amounts of money
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Why is productivity important?
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Because of its close relation to a nations standards of living. High production/high standard of living low production/ low standard of living. It also has an impact on public policy.
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What is inflation? and what is the cause of it?
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An increase in the overall level of prices in the economy. In almost all cases of large or persistent inflation, the culprit is growth in the quantity of money.
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How are inflation and public unemployment related in the short run?
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*Increasing the amount of money in the economy stimulates the overall level of spending and thus the demand for goods and services. *Higher demand may over time cause firms to raise their prices, but in the mean time, it also encourages them to hire more workers and produce a larger quantity of goods and services. *More hiring means lower unemployment.
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