Economic Decision Making Lecture

A collection of flashcards covering key concepts in economic decision making, opportunity cost, demand and supply, inflation, unemployment, and various economic principles.

Scarcity

The condition where unlimited wants exceed limited resources.

Opportunity Cost

The second most valued alternative that is sacrificed when a choice is made.

Cost-Benefit Analysis (CBA)

A process of weighing pros and cons of a possible decision to increase the likelihood of making a rational choice.

Economic Model

A theoretical representation of economic processes that simplifies reality to make predictions.

Production Possibility Frontier (PPF)

A graph that shows the different combinations of two products that can be produced with limited resources.

Rational Choice

A decision that results in more positive than negative consequences.

Demand Shifters

Factors that cause the demand curve to shift, such as consumer tastes and income.

Law of Supply

The principle that there is a direct relationship between the price of a good and the quantity supplied.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service versus what they actually pay.

Producer Surplus

The difference between what producers are willing to sell a good for versus the price they actually receive.

Inflation

A general increase in prices and fall in the purchasing value of money.

Unemployment Rate

The percentage of the labor force that is unemployed and actively seeking employment.

Cyclical Unemployment

Unemployment caused by recession or economic downturns.

Natural Resources

Raw materials and components obtained from the environment used in the production of goods.

Human Capital

The knowledge and skills a worker gains through education and experience.

Marginal Cost

The cost of producing one additional unit of product.

Diminishing Marginal Utility

The decrease in satisfaction or benefit that a consumer derives from consuming an additional unit of a good.

Interest Rate

The percentage charged on a loan or paid on savings account for the use of money.

Diminishing Returns

A principle stating that adding more of one factor of production, while holding others constant, will result in smaller increases in output.