Introduction to Economics Lecture Flashcards

Vocabulary flashcards covering core economic terms, factors of production, production possibility dynamics, and government roles based on Chapter 1-7 lecture transcript.

Scarcity

The fundamental economic condition of limited resources that creates opportunity costs and necessitates resource allocation.

Economy

The summation of all production and consumption within a system.

Land

A factor of production encompassing natural resources, including physical acreage, coal, gas, and oil.

Labor

A factor of production consisting of the employed population who are active in the labor force.

Capital

A factor of production that augments labor to enhance productivity and foster economic growth.

Entrepreneurship

A factor of production derived from a French word meaning 'to undertake,' defined primarily as business decision-making and innovation.

Opportunity Cost

The trade-off resulting from scarcity, where choosing to allocate limited resources toward one option prevents doing another.

Law of Increasing Opportunity Cost

The economic principle stating that to obtain an increasing quantity of one good, an ever-increasing quantity of another good must be sacrificed.

Production Possibility Curve

A concave graphical model showing the choices, trade-offs, and resource allocation limits between producing two distinct goods.

Efficiency

A state achieved when an economy operates directly on the production possibility curve by effectively utilizing all factors of production.

Inefficiency

A state represented by operating inside the production possibility curve, typically caused by unutilized resources or unemployment during a recession.

Gross Domestic Product (GDP)

The summation of all final goods and services produced within an economy.

Invisible Hand

Adam Smith's concept describing how free-market prices are set democratically by consumer and producer choices rather than government command.

Market Failure

A situation where the free market fails to address social welfare needs or protect labor, consumers, and the environment, requiring targeted government regulation.

Government Failure

A situation where government interventions or laws create inefficient economic outcomes or negative behavioral incentives.

Ceteris Paribus

A Latin phrase meaning 'all other things held constant,' used in economic analysis to isolate the relationship between a single independent and dependent variable.

Macroeconomics

The branch of economics that studies aggregate national economy dynamics, economic growth, and overall performance.

Microeconomics

The branch of economics focused on individual decision-making units, such as specific firms, individual households, or specific markets.