Principles of Macroeconomics: Key Vocabulary from Chapter 1

This set of flashcards covers key vocabulary terms related to the principles of economics from the lecture notes.

Economics

The study of how society manages its scarce resources.

Scarcity

The state of having insufficient resources to satisfy all wants.

Microeconomics

The study of choices that individuals and businesses make and how those choices interact in markets.

Macroeconomics

The study of the overall performance of national and global economies.

Opportunity Cost

The highest-valued alternative that must be given up to obtain something.

Rational People

Individuals who think at the margin when making decisions.

Trade-Off

Giving up one thing to obtain something else.

Marginal Change

Small incremental adjustments to a plan of action.

Incentive

Something that induces a person to act.

Market Economy

An economic system where decisions are made by the interactions of buyers and sellers.

Productivity

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

Inflation

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

Market Failure

A situation where a market left on its own does not allocate resources efficiently.

Externality

The impact of one person's actions on the well-being of a bystander.

Market Power

The ability to unduly influence market prices.

Business Cycle

Fluctuations in economic activity, such as employment and production.