Econs 1.2

Flashcards covering key concepts related to the economic way of thinking, including definitions and explanations of terms and principles.

Economics

The study of how individuals and societies choose to allocate scarce resources.

Scarcity

The limited nature of society's resources.

Opportunity Cost

The value of the next best alternative forgone when making a decision.

Purposeful Behaviour

The assumption that individuals act with rational self-interest to maximize satisfaction.

Marginal Analysis

The examination of the additional benefits and costs of an action.

Rational Self-Interest

The concept that individuals make decisions aimed at maximizing their utility.

Utility

The satisfaction or pleasure derived from consuming a good or service.

Cost-Benefit Analysis

A process of comparing the benefits of an action to the costs associated with it.

Decision-Making

The process of making choices among different alternatives.

Trade-Offs

The idea that choosing one option means giving up others.

Free Lunch

A concept indicating that nothing is truly free; someone bears the cost.

Market Demand

The total quantity of a good that buyers are willing and able to purchase.

Incentives

Factors that motivate individuals to take action or make decisions.

Marginal Benefit

The additional satisfaction gained from consuming one more unit of a good or service.

Marginal Cost

The additional cost incurred from producing one more unit of a good or service.

Economic Resources

Inputs used to produce goods and services, including land, labor, and capital.

Consumer Sovereignty

The idea that consumers dictate what goods and services are produced by their preferences.

Economic Model

A simplified representation of reality that economists use to understand real-world economic situations.

Market Equilibrium

The situation in which quantity supplied equals quantity demanded.

Supply and Demand

The relationship between the amount of a commodity available and the desire for that commodity.

Elasticity

A measure of how much buyers and sellers respond to changes in market conditions.

Diminishing Returns

The principle that as more of a resource is added, the incremental gain in output will eventually decrease.

Public Goods

Goods that are non-excludable and non-rivalrous in consumption.

Cost of Production

The total cost incurred by a company to produce a given level of output.

Imperfect Competition

A market structure where companies have some control over pricing due to competition among few sellers.

Market Failure

A situation where the allocation of resources is not efficient, often leading to a net social welfare loss.

Fiscal Policy

Government policy that uses taxation and spending to influence the economy.

Monetary Policy

Central bank actions that shape the money supply and interest rates to influence the economy.

Invisible Hand

The unintended social benefits resulting from individual actions in a free market.

Competitive Market

A market structure where many companies compete to provide goods or services to consumers.

Supply Curve

A graphical representation of the relationship between quantity supplied and price.

Demand Curve

A graphical representation of the relationship between quantity demanded and price.

Price Ceiling

A government-imposed limit on how high a price can be charged for a good or service.

Price Floor

A government-imposed limit on how low a price can be charged for a good or service.

Consumer Surplus

The difference between what consumers are willing to pay and what they actually pay.

Producer Surplus

The difference between what producers receive for a good or service and the minimum amount they are willing to accept.

Economic Efficiency

A situation in which all resources are allocated to produce the maximum possible output.

Pareto Efficiency

An economic state where resources cannot be reallocated to improve one individual's situation without worsening another's.

Externalities

Costs or benefits that affect third parties who did not choose to incur that cost or benefit.

Public Choice Theory

The theory that analyzes the choices made by voters, politicians, and bureaucrats.

Behavioral Economics

A field that studies the effects of psychological, cognitive, emotional, cultural, and social factors on economic decisions.

Regulatory Policy

Government actions that regulate or restrict economic activities.

Economic Growth

An increase in the capacity of an economy to produce goods and services, compared from one period of time to another.

Inflation

The rate at which the general level of prices for goods and services rises, eroding purchasing power.

Deflation

A decrease in the general price level of goods and services.

Gross Domestic Product (GDP)

The monetary value of all finished goods and services made within a country during a specific period.

Balance of Payments

A record of all economic transactions between residents of a country and the rest of the world.

Currency Exchange Rates

The value of one currency for the purpose of conversion to another.

Trade Deficit

A situation where a country's imports of goods and services exceed its exports.

Protectionism

Economic policy of restraining trade between nations through tariffs, quotas, and regulations.

Tariffs

Taxes imposed on imported goods to raise their prices and protect domestic industries.

Quotas

Limits on the amount of a good that can be imported or exported.

Subsidies

Financial support given by the government to help an industry or business keep prices low.

Specialization

The process of focusing on a specific good or service to gain efficiency and productivity.

Division of Labor

The assignment of different parts of a manufacturing process or task to different people to improve efficiency.

International Trade

The exchange of goods and services between countries.

Comparative Advantage

The ability of a party to produce a particular good or service at a lower opportunity cost than others.

Absolute Advantage

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

Terms of Trade

The ratio at which a country can trade its exports for imports from another country.

Foreign Direct Investment (FDI)

Investment made by a company or individual in one country in business interests in another country.

Globalization

The process by which businesses develop international influence or begin operating on an international scale.

Economies of Scale

Cost advantages gained by an increased level of production.

Market Structures

The organizational and competitive characteristics of a market.

Perfect Competition

A market structure characterized by many buyers and sellers, where no single participant can influence the price.

Monopoly

A market structure where a single seller dominates the market.

Oligopoly

A market structure in which a few large firms dominate a market.

Monopolistic Competition

A type of imperfect competition where many producers sell products that are differentiated from one another.

Financial Markets

Marketplaces for buying and selling financial assets such as stocks, bonds, and commodities.

Capital Markets

Markets where long-term debt or equity-backed securities are purchased and sold.

Stock Market

A collection of markets and exchanges where activities of buying, selling, and issuing shares of publicly-held companies occur.

Bond Market

The market where investors buy and sell debt securities, usually in the form of bonds.

Credit Market

The market through which various forms of borrowing and lending occur.

Interest Rates

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.

Mortgage

A loan used to purchase real estate, with the property serving as collateral.

Liquidity

The ease with which an asset can be converted into cash.

Risk Management

The identification, assessment, and prioritization of risks followed by coordinated efforts to minimize, control, and monitor the impact of those risks.

Investment

The act of allocating resources, usually money, in order to generate income or profit.

Asset

Any resource owned by an individual or entity that is expected to provide future economic benefit.

Liability

An obligation that an entity owes to another party.

Net Worth

The difference between the assets and liabilities of an individual or entity.

Personal Finance

The management of money and financial decisions for an individual or family.

Budgeting

The process of creating a plan to spend your money.

Savings

The portion of income not spent on current expenses; kept for future use.

Investment Portfolio

A collection of financial assets such as stocks, bonds, commodities, and real estate.

Retirement Planning

The process of determining retirement income goals and the actions and decisions necessary to achieve those goals.

Stocks

Units of ownership interest in a corporation or financial asset.

Bonds

Fixed income instruments that represent a loan made by an investor to a borrower.

Real Estate

Property consisting of land and the buildings on it.

Financial Literacy

The ability to understand and effectively use various financial skills.

Consumer Behavior

The study of how individuals make decisions to spend their resources.

Advertising

A form of communication intended to persuade an audience to purchase products or services.

Brand Loyalty

The tendency of consumers to continue buying the same brand of goods rather than competing brands.

Market Research

The process of gathering, analyzing, and interpreting information about a market.

Pricing Strategies

Methods firms use to price their products or services based on market conditions.

Public Relations

The practice of managing the spread of information between an individual or an organization and the public.

Corporate Social Responsibility (CSR)

A business model in which companies incorporate social and environmental concerns in their operations.

Supply Chain Management

The management of the flow of goods and services from raw materials to finished products.

Human Resources

The department of a business that focuses on employee recruitment, hiring, training, and development.

Leadership

The action of leading a group of people or an organization.

Management

The process of dealing with or controlling things or people.