Unit 2 Econ 200: Technology and Incentives

Vocabulary flashcards covering key concepts from the Economics lecture on Technology and Incentives.

Rational decision making

Assumes decision makers choose the option that gives the most net benefit.

Net benefit

The difference between benefit and economic cost. Also known as economic rent.

Opportunity cost

The value of the next most highly-valued alternative choice that is given up.

Economic cost

The sum of direct costs incurred by taking an action and opportunity cost.

Economic rent

The net benefit from the option taken minus the opportunity cost.

Technological progress

A reduction in the amount of labor needed to produce the same output.

Division of labor

The specialization of tasks within a production process that leads to increased efficiency.

Adam Smith

Considered the father of economics, known for advocating that individual self-interest promotes the public good.

Invisible hand

The concept that individuals pursuing their own interest inadvertently promote the overall good of society.

Absolute advantage

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

Comparative advantage

When a person can produce a good at a lower opportunity cost than another person.

Specialization

The process of focusing on a limited range of activities to increase productivity.

Gains from trade

The benefits obtained from trading goods and services between individuals or countries.

Capitalism

An economic system characterized by private property, markets, and firms.

Democracy

A political system defined by individual rights, including fair elections and freedom of speech.