Introduction to Economics

These flashcards cover foundational concepts of economics discussed in the lecture, providing key definitions and important links between economic theories and real-world applications.

What is opportunity cost in economics?

The value of the next best alternative that is forgone when making a choice.

What are price ceilings and price floors?

Price controls set by the government that can affect the laws of supply and demand.

What does the law of comparative advantage state?

That trade is a win-win situation and is based on the ability to produce goods at a lower opportunity cost.

What is marginal analysis?

The examination of the additional benefits of an activity compared to the additional costs incurred.

What are externalities in economic terms?

Social costs that affect parties external to the economic transactions.

How is productivity related to economic growth in the long run?

Productivity and growth are nearly everything for the economy's performance over time.

What is the difference between correlation and causation?

Correlation indicates a relationship between two variables, while causation implies that one variable causes a change in another.

How is GDP measured?

Gross Domestic Product (GDP) measures the total amount a country produces in a year.

What is the role of government in a mixed economy?

The government influences the economy through regulation, spending, and redistribution of wealth.

What does ‘real GDP’ represent?

Real GDP adjusts for changes in purchasing power due to inflation.

What is the significance of consumer spending in the U.S. economy?

Consumer spending accounts for 70% of GDP, with a major portion on services.

What is the Circular Flow Diagram?

A model that illustrates how goods and services flow between markets and how consumers and firms interact.