Economics Fundamentals and Market Mechanics

A set of vocabulary flashcards covering key economics concepts, trade models, and market mechanics based on the lecture notes.

Economics

Studying choices made under conditions of scarcity.

Scarcity principle

Having unlimited wants but limited available resources.

Incentive principle

People respond predictably to cost or benefit shifts.

Microeconomics

Studying individual choices and specific market decisions.

Macroeconomics

Studying the performance of overall national economies.

Positive Economic Principle

Factual, testable statements about how world works.

Normative Economic Principle

Value judgments or opinions about how things should be.

Marginal benefit

The extra benefit gained from one more unit.

Marginal cost

The extra cost paid for one more unit.

Sunk cost

Unrecoverable past costs that you must ignore.

Opportunity cost

The value of the next best foregone alternative.

Law of increasing opportunity Cost

Opportunity costs rise as you expand production further.

Absolute Advantage

Producing more total stuff using equal resources.

Comparative Advantage

Producing a good at a lower opportunity cost.

Production Possibilities Curve

Graph showing maximum production combinations for two goods.

Market Equilibrium

Point where quantity demanded equals quantity supplied.

Price ceiling

A legal maximum price set below equilibrium.

Change in Demand

Entire curve shifts due to non-price factors.

Change in quantity demanded

Movement along curve caused only by price changes.

Change in Supply

Entire curve shifts due to production adjustments.

Change in quantity supplied

Movement along curve caused only by price changes.

Average benefit (AB)

Total Cost/#of first column

Average Cost (AC)

Total Cost / # of first column

Marginal Benefit (MB)

Current Total Benefits - Previous Total Cost

Marginal Cost (MC)

Current Total Cost - Previous Total Cost

Economic Surplus

Total Benefit - Total Cost

Opportunity Cost of Column 1

Column 1 / column 2