U3AOS1 Flashcards

Economics

The study of how rational economic actors make choices to allocate scarce resources, minimizing opportunity costs and maximizing living standards.

Economy

Any place or region where production of goods and services takes place and income is generated from selling those goods and services.

Microeconomics

The study of the economic behavior of individuals as consumers and the role of individual markets and firms in resource allocation.

Macroeconomics

The study of the economy as a whole, focusing on aggregate levels of production, employment, and expenditure.

Relative Scarcity

The basic economic problem that our wants are unlimited while our resources are limited, creating an imbalance.

Opportunity Cost

The value of the next best alternative that is foregone when a choice is made; 'there is no such thing as a free lunch'.

Factors of Production

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

Land (Factors of Production)

Natural resources found in nature, such as minerals, fertile soil, and renewable resources.

Labor (Factors of Production)

The physical and mental effort of humans in the production process.

Capital (Factors of Production)

Manufactured items used in the production of goods and services, such as machinery and tools.

Entrepreneurship (Factors of Production)

The skills and risk-taking ability of individuals who combine resources to produce goods and services.

Market Capitalism

An economic system where resources are allocated based on the buying and selling decisions in a market.

Planned Socialism

An economic system where the government is primarily responsible for resource allocation and production decisions.

Consumer Sovereignty

The ability of consumers to influence what goods and services are produced based on their demands.

Invisible Hand of the Market

A concept by Adam Smith indicating that individual self-interest in a competitive market leads to optimal outcomes for society.

Production

The process of creating goods and services through the combination of various factors of production.

Expenditure

The spending of income on goods and services, crucial for measuring economic activity.

Transaction

The exchange of something of value, such as goods or services for money or other goods.

Economic Activity

Refers to the actions of individuals, businesses, and governments in producing, consuming, and exchanging goods and services.

National income

The total income earned by a nation's residents in the production of goods and services.

Aggregate Production

The total output produced by all sectors of the economy.

Inflation

The rate at which the general level of prices for goods and services rises, eroding purchasing power.