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Mankiw Chapters 1-3
The Ten Principles of Economics, Thinking Like an Economist, Interdependence and the Gains from Trade
26
Economics
11th Grade
09/14/2008

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Cards

Term
The 10 Principles of Economics
Definition
1. People Face Trade-Offs
2. The Cost of something is what you give up to get it.
3. Rational People Think at the Margin
4. People Respond to Incentives
5. Trade Can Make Everyone Better Off
6. Markets are usually a good way to organize economic activity
7. Governments can sometimes improve market outcomes
8. A country's standard of living depends on its ability to produce goods and services.
9. Prices Rise when the government prints too much money
10. Society faces a short-run trade-off between inflation and unemployment.
Term
Scarcity
Definition
the limited nature of society's resources
Term
economics
Definition
the study of how society manages its scarce resources
Term
efficiency
Definition
the property of society getting the most it can from its scarce resources
Term
equity
Definition
the property of distributing economic prosperity fairly among the members of society
Term
Opportunity Cost
Definition
Whatever must be given up to obtain some item
Term
rational people
Definition
people who systematically and purposefully do the best they can to achieve their objectives
Term
marginal changes
Definition
small incremental adjustments to a plan of action
Term
incentive
Definition
something that induces a person to act
Term
Market Economy
Definition
an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services
Term
Property Rights
Definition
the ability of an individual to own and exercise control over scarce resources
Term
market failure
Definition
a situation in which a market left on its own fails to allocate resources efficiently
Term
Externality
Definition
the impact of one person's actions on the wellbeing of a bystander
Term
market power
Definition
the ability of a single economic actor to have a substantial influence on market prices
Term
productivity
Definition
the quantity of goods and services produced from each hour of a worker's time.
Term
inflation
Definition
an increase in the overall level of prices in the economy
Term
business cycle
Definition
fluctuations in economic activity, such as employment and production
Term
Circular flow diagram
Definition
a visual model of the economy that shows how dollars flow through markets among households and firms
Term
Production possibilities frontier
Definition
a graph that shows the combinations of output that the economy can possibly produce given the available factors of production technology
Term
positive statements
Definition
claims that attempt to describe the world as it is
Term
normative statements
Definition
claims that attempt to prescribe how the world should be
Term
Absolute advantage
Definition
the ability to produce a good using fewer inputs than another producer
Term
opportunity cost
Definition
whatever must be given up to obtain some item
Term
comparative advantage
Definition
the ability to produce a good at a lower opportunity cost than another producer
Term
imports
Definition
goods produced abroad and sold domestically
Term
exports
Definition
goods produced domestically and sold abroad
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