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Scarcity
Society has limited resources and therefore cannot produce all the goods and services people wish to have
Economics
The study of how society manages its scarce resource
Rational people think at the ______
Margins
People respond to ______
Incentives
Opportunity Cost
What you have to give up in order to obtain something else
Marginal Changes
Small
People make decisions by comparing _____ and _____ at the _____
Costs, Benefits,Margins
Benefits
Margins
Utility
Usefulness of a good or service
_____ can make everyone better off
Trade
______ are a good way to organize economic activity
Markets
________ can sometimes improve market outcomes
Governments
Property Rights
The ability of an individual to own and exercise control over a scarce resource
Market Failure
occurs when the market fails to allocate resources efficiently
Externality
The impact of one person or firm\\\'s actions on the well-being of a bystander
Market Power
The ability of a single person or firm to unduly influence market prices
A country\\\'s standard of living depends on its ability to _____________
Produce goods and services
Prices rise when the government prints too much ______
Money
Inflation
An increase in the overall prices in the economy
Society faces a short-run trade off between _______ and _______
Inflation and Unemployment
Business Cycle
Fluctuations in economic activity such as employment and production
The most basic economic models are:
The Circular flow Diagram
The Production Possibilities Frontier
Supply-Demand Model
Circular Flow Diagram
A visual model of the economy that shows how dollars flow through markets among households and firms
Players in the circular flow diagram
Households
Firms
Markets in circular flow diagram
Markets for goods and services
Markets for factors of production
Production Possibilities Frontier
A graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology
Concepts illustrated by the production possibilities frontier
Efficiency
Trade-offs
Opportunity cost
Economic Growth
Microeconomics
Focuses on the individual parts of the economy
Macroeconomics
Looks at the economy as a whole
Positive Statements
Statements that attempt to describe the world as it is
Normative Statements
Statements about how the world should be
Absolute Advantage
The producer that can produce the most goods within set inputs
Comparative Advantage
The producer with the lowest opportunity cost in producing a good
Conditions for a perfectly competitive market
1. Buyers and sellers are price takers
2. Products are the same
3. There is no barrier to entry
2. Products are the same
3. There is no barrier to entry
4.There is no barrier to exit
5. Information is symmetrically complete
Monopoly
One seller
Oligopoly
Few sellers
Many barriers to entry
Monopolistic Competition
Many sellers but slightly differentiated products
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