100 Economics Terms Flashcards

Questions and Answers

What is scarcity?

The limited nature of society's resources (correct)

A type of economic policy

Unlimited resources available

The ability to produce without limits

What is economics?

The study of how society manages its scarce resources.

Define efficiency in economics.

The property of society getting the most it can from its scarce resources.

What does equity refer to in economics?

The property of distributing economic prosperity fairly among the members of society. Signup and view all the answers

What is opportunity cost?

Whatever must be given up to obtain some item. Signup and view all the answers

Define a market economy.

An economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services. Signup and view all the answers

What is an externality?

The impact of one person's actions on the well-being of a bystander. Signup and view all the answers

What does inflation mean?

An increase in the overall level of prices in the economy. Signup and view all the answers

Define the Phillips curve.

A curve that shows the short-run tradeoff between inflation and unemployment. Signup and view all the answers

What is meant by business cycle?

Fluctuations in economic activity, such as employment and production. Signup and view all the answers

What is a circular flow diagram?

A visual model of the economy that shows how dollars flow through markets and firms. Signup and view all the answers

Define production possibilities curve.

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. Signup and view all the answers

What is microeconomics?

The study of how households and firms make decisions and how they interact in markets. Signup and view all the answers

Define macroeconomics.

The study of economy-wide phenomena, including inflation, unemployment, and economic growth. Signup and view all the answers

What are positive statements?

Claims that attempt to describe the world as it is. Signup and view all the answers

Define normative statements.

Claims that attempt to prescribe how the world should be. Signup and view all the answers

What does interdependence mean?

A reciprocal relation between interdependent entities. Signup and view all the answers

Define specialization.

To focus on a particular area. Signup and view all the answers

What is absolute advantage?

The comparison among producers of a good according to their productivity. Signup and view all the answers

Define comparative advantage.

The comparison among producers according to their opportunity cost. Signup and view all the answers

What are imports?

Goods produced abroad and sold domestically. Signup and view all the answers

Define exports.

Goods produced domestically and sold abroad. Signup and view all the answers

What is the law of demand?

The claim that, other things equal, the quantity demanded of a good falls when the price of the good rises. Signup and view all the answers

Define a normal good.

A good for which, other things equal, an increase in income leads to an increase in demand. Signup and view all the answers

What is an inferior good?

A good for which, other things equal, an increase in income leads to a decrease in demand. Signup and view all the answers

What are substitutes?

Two goods for which an increase in the price of one good leads to an increase in the demand for the other good. Signup and view all the answers

Define complements.

Two goods for which an increase in the price of one good leads to a decrease in the demand for the other good. Signup and view all the answers

What is the law of supply?

The claim that, other things equal, the quantity supplied of a good rises when the price of the good rises. Signup and view all the answers

Define equilibrium.

A situation in which the price has reached the level where quantity demanded equals quantity supplied. Signup and view all the answers

What does surplus mean?

A situation in which quantity supplied is greater than quantity demanded. Signup and view all the answers

Define shortage.

A situation in which quantity demanded is greater than quantity supplied. Signup and view all the answers

Who is Adam Smith?

Scottish political economist and moral philosopher. Signup and view all the answers

What is John Maynard Keynes known for?

An English economist whose radical ideas had a major impact on modern economic and political theory. Signup and view all the answers

Study Notes

Key Economics Terms

Scarcity: Limited availability of resources in society, necessitating choices about their use.
Economics: The field dedicated to understanding how societies manage and allocate their scarce resources effectively.
Efficiency: Maximizing output and resource utilization to achieve the best possible outcomes in production.
Equity: Ensuring fair distribution of economic benefits among society's members.
Opportunity Cost: The value of the next best alternative that is foregone when making a decision.
Market Economy: An economic system where resource allocation is determined by decentralized decisions through interactions in various markets.
Externality: The effect that one individual's actions may have on the welfare of others, either positively or negatively.
Inflation: The overall increase in prices in the economy over time, reducing purchasing power.
Phillips Curve: Illustrates the inverse relationship between inflation and unemployment in the short run.
Business Cycle: The periodic fluctuations in economic activity, characterized by phases of expansion and contraction.
Circular Flow Diagram: A model representing the economy's flow of goods, services, and money among households and firms.
Production Possibilities Curve: Graph displaying the potential output combinations of different goods given available resources and technology.
Microeconomics: Focuses on individual households and firms, exploring their decision-making processes and market interactions.
Macroeconomics: Examines economy-wide phenomena, such as inflation rates, unemployment statistics, and overall economic growth.
Positive Statements: Claims about the world that aim to describe facts as they are, without value judgments.
Normative Statements: Prescriptive claims about how things should be, reflecting opinions or ideals.
Interdependence: The mutual reliance between economic entities in bilateral or multilateral contexts.
Specialization: The practice of concentrating on a specific area or task to increase efficiency and productivity.
Absolute Advantage: Indicates the ability of a producer to produce more of a good with the same resources compared to others.
Comparative Advantage: Highlights a producer's ability to produce a good at a lower opportunity cost than others, guiding trade decisions.
Imports: Goods brought into a country from abroad for domestic sale.
Exports: Goods produced within a country and sold to foreign markets.
Law of Demand: Suggests that, holding other factors constant, an increase in a good's price will reduce the quantity demanded.
Normal Good: A type of good for which demand increases as consumer incomes rise.
Inferior Good: A type of good for which demand decreases as consumer incomes rise.
Substitutes: Goods for which an increase in the price of one results in increased demand for the other.
Complements: Goods for which a price rise in one leads to decreased demand for the other.
Law of Supply: States that, all else being equal, an increase in price leads to an increase in the quantity supplied.
Equilibrium: The market state where the quantity demanded equals the quantity supplied at a given price level.
Surplus: Occurs when the quantity supplied exceeds the quantity demanded at a given price.
Shortage: Happens when the quantity demanded surpasses the quantity supplied at a specific price.
Adam Smith: Pioneering economist known for introducing concepts of free trade and capitalism in "The Wealth of Nations."
John Maynard Keynes: Influential economist advocating for government intervention in the economy, significantly impacting economic policy and theory during the Great Depression.

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Test your knowledge with these flashcards covering 100 important economics terms. Each card provides a clear definition to enhance your understanding of economic concepts like scarcity, efficiency, and equity. Perfect for students and anyone interested in economics!