Intro to Economics Flashcards

Vocabulary flashcards covering core concepts, terms, and figures from the Intro to Economics study guide.

Economics

The social science that studies how individuals, businesses, governments, and societies allocate scarce resources to satisfy unlimited wants.

Microeconomics

The branch of economics concerned with individual decision-makers, such as households, consumers, and firms.

Macroeconomics

The branch of economics that studies the economy as a whole, including inflation, unemployment, and national economic growth.

Positive Economics

An approach to economic analysis that focuses on objective facts, cause-and-effect relationships, and testable statements.

Normative Economics

An approach to economic analysis based on value judgments, subjective opinions, and statements about what the economy ought to be.

Equity-Efficiency Trade-Off

The conflict between achieving fairness (equity) in resource distribution and maximizing economic productivity or total output (efficiency).

Scarcity

The fundamental economic problem arising from limited resources being insufficient to satisfy unlimited human wants and needs.

Trade-Off

The act of giving up one benefit, quality, or option in order to gain another preferred outcome.

Opportunity Cost

The value of the next best alternative given up when making a choice.

Production Possibilities Curve

A graph showing the maximum possible combinations of two goods or services an economy can produce given fixed resources and technology.

Adam Smith

An 18th-century philosopher and economist known as the father of modern economics who introduced the concept of the invisible hand.

The Wealth of Nations (1776)

A landmark economic book written by Adam Smith in $1776$ that examined the causes of national wealth creation and free market principles.

Invisible Hand

Adam Smith's metaphor for the unobservable market force that leads individual self-interest to inadvertently promote the general economic well-being of society.

laissez-faire

An economic policy or philosophy advocating minimal government regulation, intervention, or oversight in market transactions.

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than another producer.

Absolute Advantage

The ability of an individual, firm, or country to produce more of a good or service using the same amount of resources than another producer.

Protectionism

The economic policy of restricting international imports through trade barriers such as tariffs and quotas to protect domestic industries.

Incentives

Financial or non-financial motivators that influence economic choices and behavior.

Thinking at the Margin

The practice of making economic decisions by weighing the additional (marginal) benefits against the additional (marginal) costs of an action.

"There is no such thing as a free lunch"

An economic adage asserting that every decision carries a trade-off and an opportunity cost, even if a good or service appears free of charge.

Point A on the Production Possibilities Curve

A point located inside the Production Possibilities Curve representing an inefficient state where available resources are underutilized.