Economics Flashcards (Lectures 1–3)

Flashcards covering key concepts from the first three lectures of an Economics course.

Economics

The study of scarcity, choice, and allocation of scarce resources to satisfy unlimited wants.

Scarcity

The condition of having limited resources to meet unlimited wants.

Microeconomics

The study of individual and firm decisions regarding resource allocation.

Macroeconomics

The study of the performance of the entire economy, focusing on metrics like GDP, unemployment, and inflation.

Factors of Production

Resources used to produce goods and services, including land, labor, capital, and entrepreneurship.

Opportunity Cost

The highest-valued alternative that is given up when making a choice.

Marginal Thinking

The decision-making process that assesses the benefits and costs of one additional unit.

Incentives

Changes in costs or benefits that influence an individual's or firm's behavior.

Marginal Benefit (MB)

The additional benefit derived from consuming one more unit of a good or service.

Marginal Cost (MC)

The additional cost associated with producing one more unit of a good or service.

Positive Statement

A statement that describes what is, which can be tested for its validity.

Normative Statement

A statement that prescribes what ought to be, often involving value judgments.

Invisible Hand

A concept by Adam Smith describing how self-interest can lead to social benefits.

Market Failure

A situation where the allocation of goods and services is not efficient, leading to a loss of economic welfare.

Private Goods

Goods that are excludable, rival, and divisible.

Public Goods

Goods that are non-excludable and non-rival.

Free-rider Problem

A situation where individuals benefit from resources or services without paying for them.

Negative Externality

A cost imposed on others not involved in a transaction, often resulting in overproduction.

Positive Externality

A benefit enjoyed by others not involved in a transaction, often leading to underproduction.

Functions of Government

Roles such as providing infrastructure, public goods, redistribution, and stabilization of the economy.

Classical Economics

A school of thought emphasizing that markets self-correct and focusing on monetary policy.

Keynesian Economics

An economic theory that advocates for demand-driven fiscal policies and market regulation.

Business Cycle

The fluctuations in economic activity, marked by phases of expansion and recession.

Wealth of Nations

A seminal work by Adam Smith, considered the birth of modern economics.

Iron Law of Price

The principle stating that prices must increase before they can decrease.

2007–2009 Recession

The worst economic downturn since the Great Depression.