Chapter 1 flashcards

Economics

The study of how individuals and societies allocate their limited resources to satisfy their practically unlimited needs.

Microeconomics

The study of individual units (humans) that make up the economy, focusing on individuals, businesses, and industries.

Macroeconomics

The study of the overall aspects and workings of an economy, focusing on the 'big picture.'

Opportunity Cost

The highest valued alternative that must be sacrificed to obtain something else.

Rational People

Individuals who systematically and purposefully do the best they can to achieve their objectives given available opportunities.

Marginal Benefit

The additional benefit derived from an extra unit.

Marginal Cost

The additional cost incurred from an extra unit.

Incentives

Something that induces a person to act, which can be positive (rewards) or negative (punishments).

Market

A group of buyers and sellers interacting to determine prices.

Productivity

The quantity of goods and services produced from each unit of labor input, which is the most important determinant of living standards.

Inflation

An increase in the overall level of prices in the economy, often caused by excessive growth in the quantity of money.

Economic Efficiency

Society gets the most from its scarce resources.

Economic Equality

Prosperity is distributed uniformly among society's members.

Trade-offs

Making decisions by comparing the costs and benefits of alternatives, recognizing that to get something, one must give up something else.

Government Intervention

The role of government in enforcing property rights and promoting efficiency and equality in the market.