Introduction to Economics

These flashcards contain key vocabulary terms and their definitions based on the lecture notes regarding economics, including concepts of micro and macroeconomics, opportunity cost, externalities, and economic theories.

Economics

Study of scarcity, choice, and allocation of scarce resources to satisfy unlimited wants

Scarcity

The basic problem of having infinite wants but a finite supply of resources.

Microeconomics

Decisions of individuals and firms

Macroeconomics

Performance of entire economy; focus on GDP, unemployment, inflation

Opportunity Cost

Highest valued alternative given up when you make a choice

Marginal Benefit

The benefit you get from consuming one more unit of something.

Marginal Cost

The extra cost of producing or buying one more unit of something.

Positive Statement

A statement of “what is” (can be tested)

Normative Statement

A statement of what is “ought” to be or “should” be

Invisible Hand

The idea that people looking out for themselves ends up helping society as a whole.

Public Goods

Things anyone can use that don't run out when shared, like streetlights or fresh air.

Private Goods

Things you must pay for

Negative Externality

A harmful side effect of a sale that hurts a bystander, such as pollution from a factory.

Positive Externality

A helpful side effect of a sale that benefits someone else, such as a neighbor getting a flu shot.

Functions of Government

The ways the state helps the economy, like building roads, fixing markets, and keeping things stable.

Classical Economics

The belief that markets will fix themselves over time without the government stepping in.

Keynesian Economics

The belief that the government should spend money to spark the economy when it's failing.

Business Cycle

The regular pattern of the economy growing and then shrinking over time.

Expansion

A phase where the economy is growing, jobs are being created, and GDP is rising.

Recession

A phase where the economy is shrinking, jobs are being lost, and GDP is falling.