Principles of Microeconomics Chapter 1 Ten Principles of Economics

Incentive

________: something that induces a person to act, such as a reward or punishment.

Pollution

What is negative, education is positive)

Central planning

________: only the government can organize economic activity that promotes everyones well- being.

Externalities

________ can be an unpriced benefit or cost (ex.

Rational decision maker

________ takes action only if the actions marginal benefit> marginal cost.

Inflation

________: an increase in the overall levels of prices in the economy.

Business cycle

________: the irregular and unpredictable fluctuations in economic activity, measured by production of goods /services OR # people employed.

Rational people

________ make decisions by comparing marginal benefits and marginal costs.

Trade

Principles of Microeconomics Chapter 1 Ten Principles of Economics Ch.1- Ten Principles of Economics. ________ allows each person to specialize in what he /she does best, so people can buy a greater variety of goods and services at lower cost.

Opportunity cost

________: what you give up to get that item.

Economic policy

________ can determine amount government spends /taxes /quantity of money → influence demand for goods /services → affect inflation /unemployment.

Higher demand

________ may later cause firms to raise prices, but also makes them hire more workers and produce more goods /services.

Efficiency

________: absent of waste.

Marginal change

________: a small incremental adjustment to an existing plan of action.

Equality Public policies

[________ aim to achieve more equal distribution of economic well- being.

Equality government

[________ can sometimes be corrupt; designed to only reward the powerful 1- 3 How the Economy as a Whole Works.

Marginal cost

________: the price of adding one additional unit.

Marginal benefit of RARE items

What is large? Answer with a single words or term.

Rational people

________: people who systematically and purposefully do the best they can to achieve their goals given the opportunities.