Chapters 1-4 vocab
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| scarcity | the limited nature of society’s resources, cannot produce all the goods and services people want
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| economics | the study of how society manages its scarce resources
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| efficiency | the property of society getting the most it can from its scarce resources
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| equity | the property of distributing economic prosperity fairly among the members of society
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| opportunity cost | whatever you give up to obtain some item
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| rational people | people who systematically and purposefully do the best they can to achieve their objectives
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| marginal changes | small incremental adjustments to a plan of action
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| incentive | something that induces a person to act
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| 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
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| property rights | the ability of an individual to own and exercise control over scarce resources
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| market failure | a situation in which a market left on its own fails to allocate resources efficiently
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| externality | the impact of one person's actions on the wellbeing of a bystander
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| market power | the ability of a single economic action to have a substantial influence on market prices
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| productivity | the quantity of goods and services produced from each hour of a worker's time
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| inflation | an increase in the overall level of prices in the economy
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| business cycle | fluctuations in economic activity, such as employment and production
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| circular flow design | a visual model of the economy that shows how dollars flow through markets among households and firms
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| production possibility frontiers | 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
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| microeconomics | the study of how households and firms make decisions and how they interact in markets
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| macroeconomics | the study of economy wide phenomena, including inflation, unemployment, and economic growth
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| positive statements | claims that attemplt to describe the world as it is
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| nominative statements | claims that attempt to prescribe how the world should be
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| comparative advantage | the ability to produce a good at a lower opportunity ost than another producer
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| absolute advantage | the ability to roduce a good using fewer inputs than another producer
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| export | goods produced domestically and sold abroad
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| import | goods produced abroad and sold domestically
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| market | a group of buyers and sellers of a particular good or service
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| competitive market | a market in which there are many buyers and many sellers so that each has negligible impact on the market price
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| quantity demanded | the amount of a good that buyers are willing and able to purchase
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| law of demand | the claim that, the quantity demanded of a good falls when the price of the good rises
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| demand schedule | a table that shows the relationship between the price of a good and the quantity demanded
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| normal good | a good for which, other thing equal, an increase in income leads to an increase in demand
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| inferior good | a good for which, other things equal, an increase in income leads to a decrease in deman
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| substitutes | two goods for which an increase in the price of one leads to an increase in the demand for the other
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| complements | two goods for which an increase in the price of one leads to the decrease in the demand for the other
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| quantity supplied | the amount of a good thatsellers are willing and able to sell
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| law of supply | the claim that, the quantity supplied of a good rises when the price of a good rises
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| supply schedule | a table that shows the relationship between the price of a good and the quantity supplied
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| supply curve | a graph of the relationship between the pric of a good and the quantity supplied
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| equilibrium | a situation in which the market price has reached the level at which quantity supplied equals quantity demanded
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| equilibrium price | the price that balances quantity supplied and quantity demanded
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| equilibrium quantity | the quantity supplied and demanded at the equilibrium price
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| surplus | a situation in which quantity supplied i greater than quantity demande
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| shortage | a situation in which quantity demanded is greater than quantity supplied
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| law of supply and demand | the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance
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