Markets and Economic Decisions

Flashcards covering key concepts in Microeconomics, including markets, competition, pricing, and decision-making.

Market

A place where buyers and sellers come together to trade goods and services.

Competition

The rivalry among sellers to attract buyers and among buyers to obtain goods and services.

Resource Allocation Mechanism

A system through which resources are distributed in the economy, often determined by pricing.

Shortage

A situation where demand exceeds supply in a market.

Water-Diamonds Paradox

The concept that essential items like water can be cheap while non-essential items like diamonds can be expensive due to their scarcity.

Marginal Benefit

The additional benefit received from consuming one more unit of a good or service.

Diminishing Marginal Utility

The principle that as a person consumes more of a good, the additional satisfaction gained from consuming each additional unit decreases.

Incentives

Factors that motivate individuals to make certain economic decisions.

Economic Decision-Making

The process by which individuals or groups choose among alternatives based on costs and benefits.

Average Benefit

The total benefit divided by the quantity purchased.