Principles of Economics - Key Concepts and Definitions

These flashcards cover fundamental concepts and definitions from the Principles of Economics lecture notes.

Opportunity Cost

The concept refers to the value of the next best alternative that is forgone when making a decision.

Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in price.

Microeconomics

The branch of economics that studies the behavior of individuals and firms in making decisions about the allocation of limited resources.

Macroeconomics

The branch of economics that studies the behavior and performance of an economy as a whole.

Public Finance

The study of the role of the government in the economy, particularly in terms of revenue generation and expenditure.

Monetary Policy

The process by which a central bank manages the money supply to achieve specific goals, such as controlling inflation or unemployment.

Fiscal Policy

Government policy regarding taxation and spending to influence the economy.

Balance of Trade

The difference in value between a country's imports and exports over a certain period.

Inflation

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.

Competitive Market

A market structure in which many firms offer products or services that are similar, leading to competition.

Ceteris Paribus

A Latin phrase meaning ‘all other things being equal,’ used in economics to isolate the effect of one variable on another.

Marginal Utility

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

National Income

The total income earned by a nation's residents in a year, including wages, profits, rents, and taxes.

Economic Growth

An increase in the production of goods and services in an economy over time.

Supply and Demand

A fundamental economic model of price determination in a market, where the quantity of goods supplied meets the quantity demanded.

Multiplier Effect

The proportional amount by which income increases or decreases in response to a change in spending.