ECON 101: Basic Microeconomics Flashcards

Vocabulary-style flashcards covering core economic principles, laws of supply and demand, and basic microeconomic and macroeconomic concepts.

Economics

The study of how individuals, families, businesses, and societies make critical decisions and allocate scarce resources to meet unlimited needs.

Scarcity

The fundamental problem of economics concerning limited resources but unlimited wants.

Opportunity Cost

The value of the next best alternative that must be forgone when making a choice.

Supply

The quantity of a good that producers are willing to offer at different prices.

Demand

The desire and ability of consumers to purchase goods and services.

Microeconomics

Investigates the specific decision behaviors of consumers, individual households, and distinct firms.

Macroeconomics

Examines overall, system-wide variables, focusing on macro targets and national outcomes such as inflation and unemployment.

Economy

Created by the interaction of resources, people, businesses, governments, and markets working together to produce and distribute goods and services.

Choice

The necessity for consumers to select among competing alternatives because scarcity prevents satisfying all wants.

Invisible Hand

A metaphor by Adam Smith describing how incentives in free markets lead self-interested people to accidentally act in the public interest.

Law of Supply

The principle that, ceteris paribus, when the price of a good increases, the quantity supplied increases; when the price decreases, the quantity supplied decreases.

Law of Demand

The principle that, ceteris paribus, when the price of a good increases, the quantity demanded decreases; when the price decreases, the quantity demanded increases.

Price Ceilings

Artificial caps that keep prices below market equilibrium, which can discourage output and create shortages.

Price Floors

Artificial minimum prices, such as minimum wage laws, which may trigger surpluses or lower aggregate employment demand.

Comparative Advantage

The principle that trade remains mutually beneficial if both parties focus on what they produce relatively best, even if one party is more efficient overall.

Voluntary Exchange

A transaction that increases overall welfare because both parties give up what they value less for something they value more.

Thinking at the Margin

Incremental decision making where a rational choice proceeds only as long as $MB > MC$.

Marginal Benefit (MB)

The incremental increase in benefit resulting from a specific choice, such as a higher score on an exam.

Marginal Cost (MC)

The incremental cost or sacrifice resulting from a specific choice, such as sleep deprivation or fatigue.

Externality

A cost or benefit imposed on bystanders who are not involved in the economic transaction.

Economic Efficiency

Maximizing total output by ensuring all available inputs are optimized to generate the maximum potential GDP and value.

Social Equality

Structuring resources to distribute economic welfare fairly across all citizen tiers.

Ceteris Paribus

A Latin term meaning 'other things being equal' or 'all other factors held constant' used to isolate critical variables in economics.

Production Possibility Frontier (PPF)

An economic model representing production boundaries; points on the curve are efficient, while points inside the curve are possible but inefficient.

Circular Flow of Income

An economic model showing how firms pay wages to workers, and workers in turn purchase products from firms.