Unit 1 Economics Flashcards

Vocabulary flashcards covering core economic terms, market types, historical figures, and government programs based on the Unit 1 review notes.

Guns or butter

A term used by economists and politicians to describe the choice between spending money on military needs or domestic needs (consumer goods).

Opportunity cost

The most desirable alternative somebody gives up as the result of a decision, such as giving up extra sleep time to wake up early to study.

Factor payments

The way a society distributes income, including examples such as wages for labor or rent for land.

Trade-offs

The result of every decision because resources are scarce, meaning choosing to gain one benefit forces you to give up another.

Human capital

The knowledge and skills a worker gains through education and experience, such as an auto mechanic's schooling.

Self-interest

An individual's own personal gain.

Specialization

A mechanism that allows us to sell what we have produced and buy what we want, making markets necessary.

Service

An economic activity, such as a doctor providing medical care to a sick patient.

Traditional economy

An economic system that relies on habit, custom, or ritual to decide the three key economic questions.

Positive externality

A side effect of an activity that provides a benefit to society, such as a new high school providing an educated workforce and increasing business for nearby restaurants.

Medicare and Medicaid

The two programs of health insurance for the elderly, poor, and disabled.

1930

The year the United States' welfare system began.

Market failure

Occurs when a free market is unable to distribute resources efficiently.

Profit motive

The drive that encourages individuals and businesses to make decisions that improve their material well-being.

Negative externalities

Unintended costs of an activity, such as increased noise pollution for residents and air pollution from jet engine emissions when building an airport.

Centrally planned/Command Economy

An economy where a central authority or government makes all economic decisions; offers guaranteed income but lacks worker incentives.

Microeconomics

The study of economic behavior and decision making in small units, such as households and firms.

Patent

A government license that gives the inventor of a new product the exclusive right to produce and sell it.

Copyright

A government license that grants an author exclusive rights to publish and sell creative works.

Public goods

A type of good where one key feature is making each consumer pay individually.

Free market

The foundation of the United States economy where individual choices determine what gets made, how it is made, and who consumes it.

Adam Smith

An 18th century Scotland philosopher who published 'The Wealth of Nations', which is considered the first modern work on economics and explains how markets function.

Karl Marx

A middle class philosopher born on May 5th 1818 and died in Germany 1883; he wrote a book called 'Communist Manifesto'.

Safety net program

A program designed to protect people who face unfavorable economic conditions such as lay-offs, injuries, or natural disasters.

Consumer sovereignty

The power of consumers to decide what gets produced.