Economics Unit 1 Study Guide Flashcards

Vocabulary flashcards covering core concepts from Unit 1 Economics, including economic systems, incentives, opportunity costs, property rights, marginal decision rules, and production possibilities curves.

Market Economy

An economic system characterized by private ownership, high standard of living, economic freedom and efficiency, competition, consumer-producer interaction, and positive sum outcomes.

Command Economy

An economic system relying on government ownership and centralized control of resources, prioritizing economic equity, guaranteed housing, healthcare, pensions, and zero unemployment.

Traditional Economy

An economic system that relies upon custom and habit to achieve economic goals with little change from year to year.

Positive Sum Game

A win/win situation where all participating parties benefit, such as a market economy where both buyers and sellers win.

Zero Sum Game

A win/lose situation where one party's gain comes at the direct expense of another.

Negative Sum Game

A lose/lose situation where all parties involved experience a negative outcome.

Scarcity

The economic condition caused when wants are greater than available resources, or when a resource has more than one use.

Non-Scarce Resource

A resource that is not scarce, either because it is a free good (such as air) or not wanted (such as pollution).

Factors of Production

The four economic resources used to produce goods and services: Land, Labor, Capital, and Entrepreneurship.

Opportunity Cost

The next best option you give up when you make a choice.

Tradeoff

Giving up one benefit or activity to gain another, such as spending less time watching TV so you will have more time to study.

Law of Diminishing Marginal Utility

The principle stating that your level of enjoyment goes down with each additional unit of a good consumed, such as eating extra candy bars.

Incentives

Things of value that cause certain behaviors and influence decisions.

Perverse Incentives

Incentives that cause unintended negative things to happen.

Moral Incentive

Doing something because you think it is the right thing to do, such as parents picking up their children on time before late fines were introduced.

Negative Incentives

Punishments or penalties that discourage certain behaviors.

Positive Incentives

Rewards that encourage certain behaviors.

Social Incentive

Doing something because of what others might think.

Economic Incentive

Doing something because you will receive a financial or material reward, or avoid a monetary fine.

Characteristics of Property Rights

The three essential features of property rights: Definition, Enforcement, and Transfer.

Governor Bradford's Property Reform

The decision to give pilgrims property rights allowing them to keep their crops, which caused them to work harder and grow more food.

Mystery of the Disappearing Trash Incentive

The implementation of a fee per trash bag used, which caused the total amount of trash to decline even as the town's population grew.

Tragedy of the Commons

The economic problem where valuable resources that no one owns get used up.

Law of Diminishing Marginal Returns

The economic rule stating that output growth slows down as you keep adding workers while keeping one key resource fixed.

Production Possibilities Curve

A graphical model showing trade-offs in output; moving from B to A costs $90\text{ guns}$, point D represents unemployment, and reaching point C requires getting more resources.

Patent (P)

A legal protection that gives property rights to an inventor for $20\text{ years}$.

Trademark (T)

A legal protection for brand identity or brand names, such as Pepsi.

Copyright (C)

A legal protection for creative property, such as Star Wars.

Marginal Decision Rule

The decision-making threshold stating that you decide to do something when $\text{MB (marginal benefit)} \ge \text{MC (marginal cost)}$.

Worker Hiring Rule

The principle that guides labor decisions to stop hiring with the last worker that makes you money.