Fundamental Economic Concepts

These flashcards cover key concepts and definitions from the lecture notes on fundamental economic concepts.

What does economics refer to?

The continuous exchange of goods, services, and resources necessary in any human society.

What is the basic principle of economics?

You cannot get something for nothing; everything has a cost.

What does opportunity cost refer to?

The gains that are passed over when choosing one option over another.

What is a cost-benefit analysis?

Weighing the costs of an action against the benefits it will provide.

What is labor in economics?

Workers and the work they do, including both mental and physical work.

What is capital?

The wealth used to finance a business, which can include money, buildings, and equipment.

What does profit mean in business terms?

The excess capital earned when a good is sold for more than it cost to produce.

What is a comparative advantage?

When a business can produce a good at a lower cost than any other business.

What does productivity refer to?

The output per unit of labor or the rate at which goods or services are produced.

What is entrepreneurship?

The quality of being an entrepreneur, involving ownership and management of a business.

What does specialization mean in economics?

Focusing on a limited area of economic activity that is done well or earns the most profit.

What is an economic incentive?

A motivation or encouragement for people to make certain choices or behave in a specific way.

What is a balanced budget?

A situation in which income is equal to or greater than expenses.

What is inflation?

A general, ongoing rise in the prices of goods and services.

What is deflation?

A general reduction of prices in an economy.

What does GDP stand for?

Gross Domestic Product, which measures the total dollar value of all goods and services produced.

What is the unemployment rate?

The percentage of people actively looking for employment but unable to find work.

What is monetary policy?

Government policy that manages the supply of money and interest rates.

What is fiscal policy?

The way in which government collects and spends tax revenues.

What is the difference between microeconomics and macroeconomics?

Microeconomics focuses on individual markets, while macroeconomics studies the overall economy.

What is competition in economics?

When more than one seller provides the same good or service, thereby competing for buyers.

What is an embargo?

A government order that restricts or prohibits trade with a particular nation.

What role does the government play in the national economy?

The government manages tax rates, regulates industries, and provides public services using tax revenue.