Macroeconomics (Chapter 1 and 2) – Flashcards
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Scarcity
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the limited nature of society's resources
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Economics
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the study of how society manages its scarce 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 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 Changes
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small incremental adjustments to an existing plan of action (marginal benefit - diamonds)(marginal cost - bag of peanuts and pop for a standby passenger)
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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 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 and exercise control over scarce resources (a restaurant will not sell food if customers won't pay)
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Market Failure
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a situation in which a market left on its own fails to allocate resources efficiently (a company cannot produce enough to get to customers)
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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 (for small group of actors) to have a substantial influence on market prices (competition - monopolies)
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Productivity
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the quantity of goods and services produced from each unit of labor imput
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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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Circular-flow Diagram
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a visual model of the economy that shows how dollars flow through markets among households and firms
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Production Possibilities Frontier
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a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology
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Mircoeconomics
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the study of how households and firms make decisions and how they interact in markets
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Macroeconomics
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the study of economy-wide phenomena, including inflation, unemployment, and economic growth
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Positive Statements
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claims that attempt to describe the world as it is
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Normative Statements
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claims that attempt to prescribe how the world should be
