Intro to Economics and Economic Systems

Vocabulary practice flashcards covering fundamental terms and key concepts from Intro to Economics and Economic Systems study guides.

Command Economy

An economic system in which central government authorities dictate what goods are produced, how they are produced, and who receives them.

Market Economy

An economic system driven by private individuals and businesses making decisions based on supply and demand with minimal government interference.

Mixed Economy

An economic system that combines market-based private enterprise with varying degrees of government regulation and public sector involvement.

Private Property

Legal ownership of resources, property, and assets by non-governmental entities or individuals, providing incentives for investment and resource care.

Market Failure

A situation in which the allocation of goods and services by a free market is inefficient, leading to net economic loss.

Externalities

Costs or benefits resulting from an economic activity that affect third parties who did not choose to incur that cost or benefit.

Tragedy of the Commons

An economic problem where individual users, acting independently in their own self-interest, deplete or spoil a shared common resource.

Public Goods

Goods or services provided by the government that are non-excludable and non-rivalrous, which private markets typically fail to supply adequately.

Gross Domestic Product (GDP)

The total market value of all final goods and services produced within a country's borders in a specific time period.

Fiscal Policy

Government strategy regarding taxation and public spending to influence national economic performance.

Monetary Policy

Central bank actions that manipulate interest rates and the money supply to promote economic stability and growth.

Government Policy Framework

The overarching structure dividing macroeconomic management into Monetary Policy (interest rates and money supply) and Fiscal Policy (taxation and spending).

Perverse Incentives

Incentives that produce unintentional and undesirable outcomes that run contrary to the original goals of their creators.

Economics

The social science studying how individuals, businesses, and societies allocate scarce resources to satisfy unlimited wants.

Microeconomics

The branch of economics focused on single factors, individual choices, and specific industries or markets.

Macroeconomics

The branch of economics that analyzes regional, national, or global economies as a whole, focusing on large-scale factors like GDP and inflation.

Positive Economics

An approach to economic analysis that is objective, factual, and verifiable through empirical testing.

Normative Economics

An approach to economic analysis expressing subjective value judgments or statements about what the economy ought to be.

Equity-Efficiency Trade-Off

The dilemma where policies aimed at distributing economic income fairly (equity) reduce total output or economic performance (efficiency).

Scarcity

The fundamental economic dilemma arising from unlimited human desires colliding with limited available resources.

Trade-Off

A decision-making situation involving the sacrifice of one benefit or item in order to gain another.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen over the next best option.

Production Possibilities Curve (PPC)

A graphical representation showing the maximum potential trade-off combinations of two outputs produced using fixed resources.

PPC Point Analysis (Inefficient Allocation)

A graph plotting production limits of two goods, such as Cattle prods and Chocolate donuts, where Point A inside the frontier represents inefficient resource utilization.

Adam Smith

An influential Scottish philosopher regarded as the father of modern economics who advocated for free enterprise and market self-regulation.

The Wealth of Nations (1776)

The foundational economics text published by Adam Smith in $1776$ examining economic growth, division of labor, and free market dynamics.

Invisible Hand

A metaphor created by Adam Smith describing how individuals pursuing self-interest inadvertently promote broader societal economic wellbeing.

laissez-faire

A policy of non-interference by the government in economic affairs, letting markets operate naturally.

Comparative Advantage

The ability of an individual or nation to produce a specific good at a lower opportunity cost than another producer.

Absolute Advantage

The capability of an entity to produce a higher quantity of a good or service using the exact same quantity of resources as a competitor.

Protectionism

The economic practice of restricting imports through tariffs, subsidies, or quotas to safeguard domestic industries from foreign competition.

Incentives

Motivators that encourage individuals or organizations to act or behave in a specific economic manner.