Ten Principles of Microeconomics

These flashcards cover key terms and concepts from the lecture on microeconomics, focusing on principles of decision-making, resource allocation, and market interactions.

Scarcity

The limited nature of society’s resources, meaning society cannot produce all the goods and services people want.

Economics

The study of how society manages its scarce resources.

Trade-offs

To get one thing you want, you usually must give up another thing you want.

Opportunity Cost

The cost of an item measured by whatever must be given up to obtain it.

Marginal Benefit

The extra benefit from one more unit of a decision or action.

Marginal Cost

The extra cost from one more unit of a decision or action.

Incentive

Something that induces a person to act, often influencing their decision-making.

Market Economy

An economic system where resources are allocated through the decentralized decisions of many firms and households.

Trade

The act of buying and selling goods and services, which can make everyone better off.

Externality

A source of market failure, which occurs when the production or consumption of a good affects bystanders.