Ch 1 Ten Principles of Economics-1 (1)

Economics

The study of how society allocates its scarce resources to satisfy unlimited wants and needs.

Scarcity

The limited nature of society’s resources which prevents the production of all the goods and services people wish to have.

Opportunity Cost

The cost of what must be given up to obtain some item in the decision-making process.

Marginal Analysis

The process of comparing marginal benefits to marginal costs when making a decision.

Incentives

Factors that encourage individuals to act in a certain way, influencing their decisions.

Comparative Advantage

The ability of an individual or group to carry out a particular economic activity more efficiently than another activity.

Market Mechanism

The process by which prices and production levels are determined in a free market.

Economic Efficiency

Achieving the maximum benefits from scarce resources based on the size of economic output.

Market Failure

A situation where the market left on its own fails to allocate resources efficiently.

Inflation

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

Gross National Product (GNP)

The total value of all goods and services produced by a nation's residents in a given time period.

Economic Well-Being

The overall quality of life and economic health of individuals within a society.

Labor Productivity

The quantity of goods and services produced from each unit of labor input.

Public Policy

Government actions aimed at addressing societal issues and ensuring public welfare.

Externalities

The impact of one's actions on the well-being of a bystander or third-party non-participant.