Chapter 1: Economics Basics – Texas A&M International Economics

Vocabulary flashcards covering core economics concepts from Chapter 1 notes (Texas A&M International Economics).

Economics

The science of making decisions.

Goals of Economics

Efficiency: making the largest possible economic pie from scarce resources; Equality: distributing the pie uniformly among society.

Scarcity

Resources are limited.

Time as a resource

Time is a resource; using it for one activity means forgoing another.

Efficiency

Society aims to maximize the size of the economic pie from scarce resources.

Equality

How the economic pie is distributed among members of society.

No Free Lunch

Because resources are scarce, there is no free lunch; every choice has a cost.

Opportunity Cost

The amount of goods you must give up to obtain something; OC = give up / achieve.

Cost

The ratio of what you give up to what you achieve; the same concept as opportunity cost.

Marginality

The additional costs or benefits of taking one more unit.

Marginal Cost

The additional cost of obtaining one more unit; can be zero for the first unit under a subscription (e.g., Disney Plus) and higher for subsequent units.

Market Economy

An economy where individuals make decisions based on prices; markets organize economic activity.

Market Failure

When resources are allocated inefficiently; sometimes government intervention can improve outcomes (e.g., air pollution).

Market Power

The ability to influence market prices; if you can change prices, you have market power.

Air Pollution

An example of market failure due to inefficient allocation of resources.

Opportunity Cost Formula

Opportunity Cost = give up / achieve.

Cost vs Opportunity Cost

They are the same concept; cost is the ratio of what you give up to what you obtain.