Economics

Production possibilities frontier

A graph showing the combinations of output that the economy can possibly produce given the available factors of production and available production technology

Market failure

A situation in which a market left alone fails to produce resources efficiently

Circular flow diagram

A visual model of the economy that shows how dollars flow through markets among households and firms

Property rights

Ability of a person to own and exercise control over scarce resources

Market power

Ability of one person or a group to greatly influence market prices

Inflation

An increase in the overall level of prices in the economy

Positive statements

Claims that attempt to describe the world as it is

normative statements

Claims that attempt to prescribe how the world should be

Market economy

Decisions made by many firms and households as they interact in the market for goods and services

Imports

Goods produced abroad and sold domestically

Exports

Goods produced domestically and sold abroad

Externality

Impact of one person's actions on the well-being of a bystander (pollution)

Rational people

People who logically do the best they can do to achieve their goals, given the circumstances

Marginal changes

Small adjustments to a plan of action

Efficiency

Society is getting the maximum benefits from its scarce resources

Incentive

Something that makes a person act (reward or punishment)

Macroeconomics

Study of economy wide phenomenon including inflation, unemployment, and economic growth

Microeconomics

Study of how households and firms make decisions and how they interact in markets

Comparative advantage

The ability to produce a good at a lower opportunity cost another producer

Absolute advantage

The ability to produce a good using fewer inputs then another producer

Equity

The benefits are distributed fairly among societies members

Scarcity

The limited nature of societies resources

Productivity

The quantity of goods/services produced from each hour of a workers time. Lots of productivity= $$

Economics

The study of how society manages its scarce resources

Business cycle

Unpredictable fluctuations in economic ability, such as employment and production

Opportunity cost

Whatever must be given up to obtain an item

Opportunity cost

Whatever must be given up to obtain some item