D089 - Principles of Economics
D089 - Principles of Economics
Study online at https://quizlet.com/_hl72bo
1. Economics The study of how humans make decisions in the face of scarcity.
2. Factors of produc- Describes the inputs used in the production of goods or services to make an
tion economic profit.
3. scarcity The basic economic problem; the gap between limited, scarce, resources and
theoretically limitless wants
4. What to produce, What are the three fundamental questions every economy must answer?
how it will be
produced, and for
whom the goods
or services are pro-
duced.
5. Principle 1: Every- People must decide what they are willing to give up to get what they need or
one faces trade- want.
offs
6. Opportunity Cost The next best alternative that is given up when a choice is made
7. Principle 2: The Opportunity cost is the value of the next best alternative. The idea behind
cost of something opportunity cost is that the cost of one item is the lost opportunity to do or
is determined by consume something else.
what you give up
to get it
8. Principle 3: Ratio- People make better decisions when they consider if the additional benefit they
nal people think at gain from one more unit is greater than the additional cost of that extra unit of
the margin a good or service.
9. Marginal benefit The additional benefit you gain from consuming one more of something—the
higher test grade you get from studying one more hour.
2025/2026
, D089 - Principles of Economics
D089 - Principles of Economics
Study online at https://quizlet.com/_hl72bo
10. Marginal Cost The additional cost you incur from consuming that additional unit—the hour
of TV you are giving up.
11. Principle 4: People Since most decisions are based on costs versus benefits, people's attitudes may
respond to incen- change when there is a change in the cost or benefit of something.
tives
12. Principle 5: Trade Trade allows people to concentrate on what they do best and exchange their
can leave every- ability with others to supplement their own needs.
one in a better po-
sition
13. Principle 6: Mar- Free markets are comprised of many goods and services as well as multiple
kets are a sound buyers and sellers who are mostly focused on their own well-being. Free
method of orga- markets have consistently succeeded in promoting organized economic activity
nizing economic and achieving overall economic well-being.
activity
14. Principle 7: Gov- In some cases, government intervention through policy can promote market
ernments can efficiency and equity. However, economists are cautious about external inter-
sometimes better ventions because they have been known to cause unintended issues for the
market outcomes economic system.
15. Principle 8: The There is a fundamental relationship between productivity and living standards.
standard of liv- The more productive a society, the better its people live.
ing for a nation
is determined by
its ability to pro-
duce goods and
services
16. Principle 9: Print-
ing too much mon-
2025/2026
, D089 - Principles of Economics
D089 - Principles of Economics
Study online at https://quizlet.com/_hl72bo
ey causes prices to Consistently rising prices for goods and services results in inflation. This eco-
rise nomic phenomenon is directly related to excessive government-printed curren-
cy circulating.
17. Principle 10: So- Most economists agree that there is a relationship between inflation and unem-
ciety faces a ployment. To lower inflation, the government may reduce the amount of money
short-run trade-off in the economy. This, in turn, reduces the amount of money people spend.
between inflation
and unemploy-
ment
18. traditional econo- What kind of economy?
my
19. Command (cen- What kind of economy?
tralized) economy
20. market (decentral- What kind of economy?
ized) economy
21. Mixed economy In this type of economic system, decisions are made based on consumer
demands. However, there is government involvement in making decisions about
consumer safety, environmental, and other regulations.
22. Normative These statements are opinions that express value or normative judgments
about economic fairness. They focus on what the outcome of the economy or
goals of public policy should be.
23. Economic indica-
tors
2025/2026
D089 - Principles of Economics
Study online at https://quizlet.com/_hl72bo
1. Economics The study of how humans make decisions in the face of scarcity.
2. Factors of produc- Describes the inputs used in the production of goods or services to make an
tion economic profit.
3. scarcity The basic economic problem; the gap between limited, scarce, resources and
theoretically limitless wants
4. What to produce, What are the three fundamental questions every economy must answer?
how it will be
produced, and for
whom the goods
or services are pro-
duced.
5. Principle 1: Every- People must decide what they are willing to give up to get what they need or
one faces trade- want.
offs
6. Opportunity Cost The next best alternative that is given up when a choice is made
7. Principle 2: The Opportunity cost is the value of the next best alternative. The idea behind
cost of something opportunity cost is that the cost of one item is the lost opportunity to do or
is determined by consume something else.
what you give up
to get it
8. Principle 3: Ratio- People make better decisions when they consider if the additional benefit they
nal people think at gain from one more unit is greater than the additional cost of that extra unit of
the margin a good or service.
9. Marginal benefit The additional benefit you gain from consuming one more of something—the
higher test grade you get from studying one more hour.
2025/2026
, D089 - Principles of Economics
D089 - Principles of Economics
Study online at https://quizlet.com/_hl72bo
10. Marginal Cost The additional cost you incur from consuming that additional unit—the hour
of TV you are giving up.
11. Principle 4: People Since most decisions are based on costs versus benefits, people's attitudes may
respond to incen- change when there is a change in the cost or benefit of something.
tives
12. Principle 5: Trade Trade allows people to concentrate on what they do best and exchange their
can leave every- ability with others to supplement their own needs.
one in a better po-
sition
13. Principle 6: Mar- Free markets are comprised of many goods and services as well as multiple
kets are a sound buyers and sellers who are mostly focused on their own well-being. Free
method of orga- markets have consistently succeeded in promoting organized economic activity
nizing economic and achieving overall economic well-being.
activity
14. Principle 7: Gov- In some cases, government intervention through policy can promote market
ernments can efficiency and equity. However, economists are cautious about external inter-
sometimes better ventions because they have been known to cause unintended issues for the
market outcomes economic system.
15. Principle 8: The There is a fundamental relationship between productivity and living standards.
standard of liv- The more productive a society, the better its people live.
ing for a nation
is determined by
its ability to pro-
duce goods and
services
16. Principle 9: Print-
ing too much mon-
2025/2026
, D089 - Principles of Economics
D089 - Principles of Economics
Study online at https://quizlet.com/_hl72bo
ey causes prices to Consistently rising prices for goods and services results in inflation. This eco-
rise nomic phenomenon is directly related to excessive government-printed curren-
cy circulating.
17. Principle 10: So- Most economists agree that there is a relationship between inflation and unem-
ciety faces a ployment. To lower inflation, the government may reduce the amount of money
short-run trade-off in the economy. This, in turn, reduces the amount of money people spend.
between inflation
and unemploy-
ment
18. traditional econo- What kind of economy?
my
19. Command (cen- What kind of economy?
tralized) economy
20. market (decentral- What kind of economy?
ized) economy
21. Mixed economy In this type of economic system, decisions are made based on consumer
demands. However, there is government involvement in making decisions about
consumer safety, environmental, and other regulations.
22. Normative These statements are opinions that express value or normative judgments
about economic fairness. They focus on what the outcome of the economy or
goals of public policy should be.
23. Economic indica-
tors
2025/2026
