Microeconomics Chapters 1-4
scarcity - Answer-the limited nature of society's resources
economics - Answer-the study of how society manages it's scarce resources
4 ways people make decisions - Answer-1)people face tradeoffs
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
3 ways people interact - Answer-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
efficiency - Answer-when society gets most from scarce resources
equality - Answer-when prosperity is distributed uniformly among society's members
opportunity cost - Answer-whatever must be given up to obtain some item
rational people - Answer-people who systematically and purposefully do the best they can do to achieve
their objectives
, marginal changes - Answer-small incremental adjustments to a plan of action
incentive - Answer-something that induces a person to act
market economy - Answer-an economy that allocates resources through the decentralized decisions of
many firms and households as they interact in markets for goods and services
property rights - Answer-the ability of an individual to own and exercise control over scarce resources
market failure - Answer-a situation in which a market left on its own fails to allocate resources efficiently
externality - Answer-the impact of one person's actions on the well-being of a bystander
market power - Answer-the ability of a single economic actor(or small group of actors) to have a
substantial influence on market prices
productivity - Answer-the quanitity of goods and services produced from each unit of labor input
inflation - Answer-an increase in the overall level of prices in the economy
business cycle - Answer-fluctuations in economic activity, such as employment and production
circular-flow diagram - Answer-a visual model of the economy that shows how dollars flow through
markets among households and firms
scarcity - Answer-the limited nature of society's resources
economics - Answer-the study of how society manages it's scarce resources
4 ways people make decisions - Answer-1)people face tradeoffs
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
3 ways people interact - Answer-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
efficiency - Answer-when society gets most from scarce resources
equality - Answer-when prosperity is distributed uniformly among society's members
opportunity cost - Answer-whatever must be given up to obtain some item
rational people - Answer-people who systematically and purposefully do the best they can do to achieve
their objectives
, marginal changes - Answer-small incremental adjustments to a plan of action
incentive - Answer-something that induces a person to act
market economy - Answer-an economy that allocates resources through the decentralized decisions of
many firms and households as they interact in markets for goods and services
property rights - Answer-the ability of an individual to own and exercise control over scarce resources
market failure - Answer-a situation in which a market left on its own fails to allocate resources efficiently
externality - Answer-the impact of one person's actions on the well-being of a bystander
market power - Answer-the ability of a single economic actor(or small group of actors) to have a
substantial influence on market prices
productivity - Answer-the quanitity of goods and services produced from each unit of labor input
inflation - Answer-an increase in the overall level of prices in the economy
business cycle - Answer-fluctuations in economic activity, such as employment and production
circular-flow diagram - Answer-a visual model of the economy that shows how dollars flow through
markets among households and firms
