Key Economic Concepts

These flashcards cover essential economic terms and concepts, providing definitions to aid in exam preparation.

Trade-off

A trade-off is an action or decision that involves giving up one option in favor of another.

Opportunity Cost

The opportunity cost is the value of the next best alternative foregone when a decision is made.

Marginal Benefit

Marginal benefit is the additional satisfaction or utility gained from consuming one more unit of a good or service.

Incentives

Incentives are factors that motivate individuals to act or make decisions.

Invisible Hand

The invisible hand is a metaphor for the self-regulating nature of the marketplace, where individual self-interest leads to societal benefits.

Market Failure

Market failure occurs when the allocation of goods and services by a free market is not efficient.

Externalities

Externalities are the effects of an economic activity that impact third parties who are not involved in that activity.

Market Power

Market power is the ability of a buyer or seller to influence market prices.

Productivity

Productivity refers to the efficiency of production, typically measured as the output per hour of labor.

Inflation

Inflation is the overall increase in prices in an economy over a period of time.

Unemployment

Unemployment is the situation in which individuals who are capable of working are unable to find a job.

Sunk Cost

A sunk cost is a cost that has already been incurred and cannot be recovered.

Efficiency

Efficiency refers to the optimal use of resources to achieve the best outcomes.

Equality

Equality in economics generally refers to a fair distribution of resources among the members of a society.