Economics for Accounting and Finance - Key Concepts

Flashcards covering key economic concepts relevant to Accounting and Finance.

Scarcity

The fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.

Factors of Production

The resources used to produce goods and services, classified into land, labor, capital, human capital, and entrepreneurship.

Opportunity Cost

The cost of foregoing the next best alternative when making a decision.

Principal-Agent Problem

A conflict in priorities between a person or group and the representative authorized to act on their behalf, arising from information asymmetry.

Microeconomics

The branch of economics that studies individual agents, like consumers and firms, and their decisions in markets.

Economies of Scale

Cost advantages obtained due to the scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units.

Transaction Costs

The costs associated with making an economic exchange.

External Influences

Factors that affect a firm or market from outside, including economic conditions, regulations, and market trends.

Rational Choices

Economic theory assumption that agents will make decisions to maximize their utility based on available information.

Micro-Economic Influences

Factors affecting individual firms or markets, as opposed to the overall economy.