Introduction to Microeconomic Theory - Vocabulary

Vocabulary flashcards covering core concepts from the lecture notes on introduction to microeconomic theory.

Scarcity

The limited nature of society's resources.

Economics

The study of how society manages its scarce resources.

Tradeoff

A situation in which producing more of one thing requires sacrificing some of another; e.g., efficiency vs. equality.

Efficiency

Getting the most from scarce resources; making the best use of resources.

Equality

A fair distribution of resources across society.

Opportunity Cost

The value of the best alternative forgone when making a decision.

Implicit Costs

Costs not paid with money; non-monetary opportunity costs.

Explicit Costs

Monetary payments made in the course of a decision.

Marginal Change

An incremental adjustment to an existing plan; decisions are evaluated by marginal costs and benefits.

Incentive

Something that induces a person to act, such as a reward or punishment.

Specialization

Focusing production on one good or service to enable exchange with others.

Market

An arrangement that brings buyers and sellers together to determine prices and allocate resources; usually efficient.

Monopoly

A market structure with a single seller dominating the market.

Externalities

Costs or benefits of a transaction that affect third parties not directly involved.

Public Goods

Goods that are non-excludable and non-rivalrous, often underprovided by markets.

Standard of Living

The overall level of living standards in a country, influenced by its ability to produce goods and services.

Inflation

A general rise in prices; occurs when the government prints too much money.

Inflation-Unemployment Trade-off

In the short run, there is a trade-off where policies affecting inflation can influence unemployment and vice versa.

Business cycle

Fluctuations in economic activity, such as employment and production

Productivity

The quantity of goods and services produced from each unit of labor input

Market economy

An economy that allocates resources through decentralized decisions of many firms and households as they interact in markets for goods and services