flashcards

Incentive

A thing that motivates people to take action or make decisions, such as rewards or penalties.

Scarcity

The economic problem where human wants are unlimited but resources are limited, leading to the need for choices.

Opportunity Cost

The value of the next best alternative that must be given up when making a decision.

Cost-Benefit Analysis (Marginalism)

A decision-making process where people take action if the benefits of an action outweigh its costs.

Factors of Production

The resources used to produce goods and services: land, labor, capital, and entrepreneurship.

Production Possibilities Curve

A graph showing the maximum combinations of two goods that can be produced with a given set of resources, demonstrating trade-offs and opportunity costs.

Supply Curve

A graph that shows the relationship between the price of a good and the quantity supplied by producers, typically sloping upward.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded by consumers, typically sloping downward.

Marketplace

The environment in which buyers and sellers interact to exchange goods, services, or resources.

Prices

The amount of money that must be paid to acquire a good or service, determined by supply and demand.

Equilibrium Price

The price at which the quantity demanded by consumers equals the quantity supplied by producers, where the supply and demand curves intersect.

Market Regulation

Rules or laws established by the government or a regulatory body to ensure fairness, safety, and competition in the marketplace.

Regulatory Agency (Example)

A government body that oversees and enforces regulations in a specific industry, like the FDA regulating food and drugs.

Monopoly

A market structure where there is only one producer or seller, giving them control over the supply of a good or service, leading to limited competition.

Antitrust

Laws designed to prevent monopolies, promote competition, and protect consumers from unfair business practices.

Price Ceiling

A maximum legal price set by the government for a good or service, intended to prevent prices from becoming too high.

Price Floor

A minimum legal price set by the government, intended to prevent prices from falling too low and ensuring fair wages or income.

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than others.

Absolute Advantage

The ability to produce more of a good or service than another entity using the same amount of resources.

Specialization

The practice of focusing on a specific task or skill to increase efficiency, often based on comparative advantage.

Trade-offs

The concept that in order to gain something, one must give up something else, highlighting the need for decision-making in the face of scarcity.