Mauro Notes – Principles of Economics: Incentives, Costs, Scarcity, and Trade-offs (Vocabulary)

Vocabulary flashcards covering incentives, costs, scarcity, marginal analysis, trade-offs, and macroeconomic concepts from Mauro Notes.

Incentives

Anything that motivates a person to act; incentives help explain behavior, including prices as a common incentive used by economists.

Prices (as incentives)

A mechanism economists use to signal scarcity and influence decisions; prices affect what to buy, produce, and consume.

Opportunity cost

The value of the best alternative forgone when making a choice.

Rational behavior

Rational people think at the margin and act to best achieve their goals given available opportunities.

Marginal change

A small incremental adjustment to a plan of action.

Marginal cost

The additional cost incurred from producing one more unit or making one more change.

Marginal benefit

The additional benefit received from producing or consuming one more unit or making one more change.

Marginal analysis

The process of evaluating costs and benefits of marginal changes to decide whether to undertake an action.

Diminishing marginal utility

The idea that the extra satisfaction from each additional unit falls as more of the good is consumed.

Trade-off

Choosing one option requires giving up another; achieving more of one thing often means less of another.

Scarcity

Limited resources relative to wants; society cannot produce unlimited goods.

Efficiency

Using resources in a way that maximizes total benefits, i.e., the size of the economic pie.

Equity

Fair distribution of resources and benefits among members of society.

Economics

The study of how individuals and firms allocate scarce resources to satisfy wants and how production and consumption occur under scarcity.

Macroeconomics

The study of the economy as a whole, including overall production and how scarce resources are managed at the societal level.

Time allocation

How people divide their time between work, leisure, and other activities.

Consumption today vs. tomorrow

The trade-off between present and future consumption when making decisions.