Econ Unit 1

scarcity

limited nature of society’s resources

economics

study of how society manages scarce resources

efficience

property of society getting the most it can from scarce resources

equality

property of distributing economic prosperity uniformly among members of society

opportunity cost

whatever must be given up to obtain some item

rational people

people who systematically & purposefully do the best they can to achieve their objectives

marginal changes

small incremental changes/adjustments to a plan of action

incentive

something that induces a person to act

market economy

economy that allocates resources through decentralized decisions of many firms & households as they interact in markets for goods & services

property rights

ability of individual to own & exercise control over scarce resources

market failure

situation in which a market left on its own fails to allocate resources efficiently

externality

impact on one person’s actions on wellbeing of a bystander

market power

ability of single economic actor (small group of actors) to have substantial influence on market prices

productivity

quantity of goods & services produced from each unit of labor input

inflation

increase in overall level of prices in economy

business cycle

fluctuations in economic activity, such as employment & production

positive statements

claims that attempt to describe the world as it is

normative statements

claims that attempt to prescribe how the world should be

absolute advantage

ability to produce a good using fewer inputs than another producer

comparative advantage

ability to produce a good at a lower opportunity cost than another producer

imports

goods produced abroad and sold domesticallye

exports

goods produced domestically and sold abroad