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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 |
| equity | the property of distributing economic prosperity fairly among the members of society |
| opportunity cost | whatever you give up to obtain some item |
| rational people | people who systematically and purposefully do the best they can to achieve their objectives |
| marginal changes | small incremental adjustments to a plan of action |
| incentive | something that induces a person to act |
| 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 |
| property rights | the ability of an individual to own and exercise control over scarce resources |
| market failure | a situation in which a market left on its own fails to allocate resources efficiently |
| externality | the impact of one person's actions on the wellbeing of a bystander |
| market power | the ability of a single economic action to have a substantial influence on market prices |
| productivity | the quantity of goods and services produced from each hour of a worker's time |
| inflation | an increase in the overall level of prices in the economy |
| business cycle | fluctuations in economic activity, such as employment and production |
| circular flow design | a visual model of the economy that shows how dollars flow through markets among households and firms |
| 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 |
| microeconomics | the study of how households and firms make decisions and how they interact in markets |
| macroeconomics | the study of economy wide phenomena, including inflation, unemployment, and economic growth |
| positive statements | claims that attemplt to describe the world as it is |
| nominative statements | claims that attempt to prescribe how the world should be |
| comparative advantage | the ability to produce a good at a lower opportunity ost than another producer |
| absolute advantage | the ability to roduce a good using fewer inputs than another producer |
| export | goods produced domestically and sold abroad |
| import | goods produced abroad and sold domestically |
| market | a group of buyers and sellers of a particular good or service |
| competitive market | a market in which there are many buyers and many sellers so that each has negligible impact on the market price |
| quantity demanded | the amount of a good that buyers are willing and able to purchase |
| law of demand | the claim that, the quantity demanded of a good falls when the price of the good rises |
| demand schedule | a table that shows the relationship between the price of a good and the quantity demanded |
| normal good | a good for which, other thing equal, an increase in income leads to an increase in demand |
| inferior good | a good for which, other things equal, an increase in income leads to a decrease in deman |
| substitutes | two goods for which an increase in the price of one leads to an increase in the demand for the other |
| complements | two goods for which an increase in the price of one leads to the decrease in the demand for the other |
| quantity supplied | the amount of a good thatsellers are willing and able to sell |
| law of supply | the claim that, the quantity supplied of a good rises when the price of a good rises |
| supply schedule | a table that shows the relationship between the price of a good and the quantity supplied |
| supply curve | a graph of the relationship between the pric of a good and the quantity supplied |
| equilibrium | a situation in which the market price has reached the level at which quantity supplied equals quantity demanded |
| equilibrium price | the price that balances quantity supplied and quantity demanded |
| equilibrium quantity | the quantity supplied and demanded at the equilibrium price |
| surplus | a situation in which quantity supplied i greater than quantity demande |
| shortage | a situation in which quantity demanded is greater than quantity supplied |
| 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 |
