Unit 1: Foundations of Economics

Vocabulary flashcards based on the key concepts discussed in the Foundations of Economics lecture focusing on trade-offs and opportunity costs.

Trade-Off

The act of making a choice between two or more alternatives.

Opportunity Cost

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

Scarcity

The limited nature of society's resources, forcing choices about resource allocation.

Rational Choice

A decision-making process wherein the benefits outweigh the costs.

Irrational Choice

A decision-making process where the costs outweigh the benefits.

Incentives

Factors that motivate individuals to act, often influencing decision-making.

Production Possibilities Curve (PPC)

A model that illustrates the maximum combinations of goods and services that can be produced with limited resources.

TINSTAAFL

A principle stating that 'There is no such thing as a free lunch'; every choice has a cost.

Secondary Effects

Consequences of economic choices that may not be immediately apparent.

Association Is Not Causation

The notion that correlation between two variables does not necessarily imply that one causes the other.

Production Possibilities

The set of all possible output combinations of two goods that can be produced using available resources.