Download Economic Principles: Scarcity, Efficiency, and Market Systems and more Quizzes Economics in PDF only on Docsity! TERM 1 Scarcity DEFINITION 1 the limited nature of society's resources TERM 2 Economics DEFINITION 2 the study of how society manages its scarce resources TERM 3 Principle #1: people face trade off's DEFINITION 3 all decisions involve tradeoffex) having more $ to buy stuff requires working longer hours, which means less time for leisure TERM 4 Society faces an important trade off... DEFINITION 4 efficiency vs. equality (equity) TERM 5 Efficiency DEFINITION 5 when society gets the most from its scare resources TERM 6 Equality (equity) DEFINITION 6 when prosperity is distributed uniformly among society's memebers TERM 7 Efficiency vs. equality (equity) trade off DEFINITION 7 to achieve greater eqality, could redistribute income from wealthy to poor. But this reduces incentive to work and produce, shrinks the size of the economic "pie" TERM 8 Principle #2: The cost of something is what you give up to get it DEFINITION 8 making decisions requires comparing the costs and the benefits of alternative choices TERM 9 opportunity cost DEFINITION 9 is whatever must be given up to obtain any itemorhighest value alternative forsakenex) going to college for a year is not just the tution, books and fees, but also the foregone wages TERM 10 rational people DEFINITION 10 systematically and purposefully do the best they can to achieve their objectivesmake decisions byevaluatingcosts and benefits of marginal changes (incremental adjustments to an existing plan) TERM 21 Externalities DEFINITION 21 when the production or consumption of a good affects bystanders-can be good or bad-ex) pollution TERM 22 Market Price DEFINITION 22 a single buyer or seller has substantial influence on market priceex) monopoly TERM 23 Principle #8: a country's standard of living depends on its ability to produce good and services DEFINITION 23 the most importantdeterminateof living standards: productivity ( the amount of goods and services produced per unit of labor) TERM 24 productivity DEFINITION 24 the amount of goods and services produced per unit of labor- depends on theequipment, skills, and technologyavailableto workers-other factors (ex-labor unions, competition from abroad) have less impact on living standards TERM 25 Principle #9: prices rise when the government prints too much money DEFINITION 25 Inflation (increases in the general level of pricesin the long run, inflation is almost alwyas caused by excessive growth in the quantity of moeny, which causes the value of money to fall-the faster the government creates money, the greater the inflation rate TERM 26 Inflation DEFINITION 26 increases in thegenerallevel of prices TERM 27 Principle #10: society faces a short-run tradeoff bewteen inflation and unemployment DEFINITION 27 -in the short run (1-2 years) -many economic policies push inflation and unemployment in opposite directions. - other factors can make this tradeoff more or less favorable, but the tradeoff is always present
