Economics for Business - Lecture 1: Introduction to Economics

Flashcards based on the introductory lecture on microeconomics, covering key concepts, economic systems, and the nature of economic reasoning.

Microeconomics

The branch of economics that studies the behavior of individual units such as households, firms, and industries.

Macroeconomics

The branch of economics that studies economic aggregates, such as overall price levels, output, and employment.

Scarcity

The central economic problem arising from limited resources and unlimited wants.

Factors of Production

Resources used in the production process, including land, labor, and capital.

Opportunity Cost

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

Marginal Cost

The additional cost incurred from one more unit of activity.

Marginal Benefit

The additional benefit received from one more unit of activity.

Efficiency

A state where resources are allocated in the most productive way, minimizing waste.

Equity

Fairness in the distribution of resources and outcomes.

Production Possibility Curve

A graph that shows the maximum combinations of goods and services an economy can produce with given resources and technology.

Command Economy

An economic system where the government makes all decisions about production and allocation of resources.

Free-Market Economy

An economic system where decisions are made by individual households and firms with minimal government intervention.

Price Mechanism

The system where prices are determined by supply and demand, signaling resource allocation in a free-market economy.

Equilibrium Price

The price at which the quantity demanded equals the quantity supplied in a market.

Shortage

A situation where the quantity demanded exceeds the quantity supplied at a given price.

Surplus

A situation where the quantity supplied exceeds the quantity demanded at a given price.

Mixed Economy

An economic system that combines elements of both command and free-market economies.

Economic Model

A simplified representation of reality used to analyze economic situations and predict outcomes.

Positive Economics

Statements about how the world is, based on facts and evidence.

Normative Economics

Statements about how the world should be, based on opinions and values.

Inflation

A sustained increase in the general price level in an economy.

Recession

A period of temporary economic decline during which trade and industrial activity are reduced.

Unemployment

The state of being without a job but actively seeking work.

Balance of Trade

The difference between a country's exports and imports.

Demand-Side Policy

Government policies aimed at influencing aggregate demand in the economy.

Supply-Side Policy

Government policies aimed at increasing the productive capacity of the economy.

Circular Flow of Income

A model showing the flow of goods, services, and money between households and firms in an economy.

Goods Market

A market where goods and services are exchanged.

Factor Market

A market where factors of production (land, labor, capital) are exchanged.

Invisible Hand

A concept by Adam Smith that suggests markets guide production and consumption through self-interest and competition.