Principles of Economics Flashcards

Flashcards based on the ten principles of economics, key definitions, and concepts discussed in the lecture.

Economics

The study of how society manages its scarce resources.

Scarcity

The limited nature of society’s resources.

Efficiency

The property of society getting the maximum benefits from its scarce resources.

Equity

The property of distributing economic prosperity fairly among the members of society.

Opportunity Cost

Whatever must be given up to obtain some item.

Rational People

People who systematically and purposefully do the best they can to achieve their objectives.

Marginal Changes

Small incremental adjustments to a plan of action.

Incentive

Something that induces a person to act.

Property Rights

The ability of an individual to own and exercise control over scarce resources.

Market Economy

An economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services.

Market Failure

A situation in which a market left on its own fails to allocate resources efficiently.

Externality

The impact of one person’s actions on the well-being of a bystander.

Productivity

The quantity of goods and services produced from each hour of a worker’s time.

Inflation

An increase in the overall level of prices in the economy.

Business Cycle

The irregular and largely unpredictable fluctuations in economic activity, as measured by the production of goods and services or the number of people employed.