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Econ vocabulary
Term | Definition |
---|---|
Efficiency | Most productive use of a resource. |
Equity | Fair distribution of prosperity among society's members. |
Tradeoff | More equity (the redistribution of income from well off to the poor) can reduce efficiency. |
Opportunity Cost | Whatever must be given up to obtain it (or value of the next best alternative). Example. Cost of School upfront vs. increase in wages. |
Marginal | Small incremental adjustments (or 1 unit of change). Ex.ample.How will an additional year of college effect my earnings? |
Incentive | Something that includes a person to act, i.e. The prospect of reward or punishment. |
Market | Group of buyers |
Market economy | Decisions made from interactions of many households/firms. |
Stock market | Invisible hand at work...interaction where buyers & sellers determine quantity. |
Price | VALUE to buyers + COST to Sellers = PRICE |
Command economy | Centeral planner/government sets prices/quantities (Cuba). |
Government role in market | 1.Provide security to encourage work, production, investment. 2.Promote efficiency 3.Market Power, ensures no monopoly. |
Extra-normality | Good production = harmful effect (pollution) |
Productivity | The amount of goods & services produced per unit of labor. *Most important determining factor of living standards* *Productivity depends on equipment, skills & tech. |
Inflation | Increase in price level. Caused by excessive growth. The faster the government prints money, the higher the inflation rate. |
No Free Lunch | Always trade offs! |