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Economics
The study of how society manages its scarce resources.
Scarcity
The limited nature of society's resources.
Tradeoffs
All decisions involve tradeoffs, such as balancing efficiency and equality.
Efficiency
When society gets the most from its scarce resources.
Equality
When prosperity is distributed uniformly among society's members.
Opportunity Cost
The cost of something is what you give up to get it; relevant for decision making.
Marginal Changes
Incremental adjustments to an existing plan.
Incentive
Something that induces a person to act, like a reward or punishment.
Market Economy
An economy that allocates resources through the decentralized decisions of many households and firms.
Market Failure
Occurs when the market fails to allocate society's resources efficiently.
Productivity
The amount of goods and services produced per unit of labor; determinant of living standards.
Inflation
An increase in the general level of prices, caused by excessive growth in the quantity of money.
Invisible Hand
Refers to how self-interested households and firms make decisions that maximize society’s economic well-being.
Property Rights
Essential for market economies, protecting people's ability to own and control their resources.
International Trade
Allows countries to sell their exports abroad at higher prices and buy goods from abroad more cheaply.
Market Equilibrium
The state in which market supply and demand balance each other, resulting in stable prices.
Monopoly
A market structure where a single seller controls the entire market supply of a product or service.
Consumer Surplus
The difference between what consumers are willing to pay for a good and what they actually pay.
Producer Surplus
The difference between what producers are willing to accept for a good and the actual price they receive.
Elasticity
A measure of how much the quantity demanded or supplied responds to changes in price.
Externalities
Costs or benefits of a market activity that affect third parties not involved in the transaction.
Public Goods
Goods that are non-excludable and non-rivalrous, meaning they can be consumed by anyone without restriction.
Fiscal Policy
Government adjustments to spending levels and tax rates to influence economic activity.
Monetary Policy
The process by which a central bank manages the money supply and interest rates to ensure price stability.
